With the recent string of positive economic data suggesting the U.S. economic recovery was on a stronger footing, the U.S. Federal Reserve Tuesday projected that the pace of U.S. economic activity would pick up gradually in 2012 and 2013, but the nation's job and property markets would continue to remain weak.
The U.S. economy would gain momentum this year and next, boosted by the "accommodative monetary policy, further increases in credit availability, and improvements in consumer and business sentiment," the central bank said in the minutes of a December 2011 Federal Open Market Committee (FOMC) meeting released Tuesday.
To help lift the world's largest economy out of the most severe recession in decades and boost domestic lending and consumption, the Fed had kept its key federal funds rate at a historically ultra-low range of zero to 0.25 percent since the end of 2008.
The United States registered a 1.8 percent economic growth in the third quarter of 2011, lower than the previous estimates, but was a welcome acceleration from the 0.9 percent growth in the first half of last year.
"The information reviewed at the Dec. 13 meeting indicated that U.S. economic activity expanded moderately despite some apparent slowing in the growth of foreign economies and strains in global financial markets," noted the minutes, usually released three weeks after the meeting of the FOMC, the Fed's powerful interest- rate setting panel.
A separate report released Tuesday by the U.S. Institute of Supply Management (ISM) showed that the nation's manufacturing sector expanded at the fastest pace in six months in December, offering relief that the U.S. economy could outpace the eurozone economies this year as the two-year-old eurozone debt turmoil was overhanging global recovery.
However, some economists held that the world's largest economy would be confronted with new risks triggered by eurozone debt crisis and a set of unsolved domestic structural problems including spiking federal debts and low utilization rates of factories.
The best scenario for this year would be a slower growth due to great uncertainties, including evolution of European crisis and its spillover effects, still feeble recovery in the United States, as well as a slowdown in emerging countries in their course of structural reforms, Uri Dadush, a senior associate with Carnegie Endowment for International Peace, said in a recent interview.
"Over the forecast period, the gains in real gross domestic product (GDP) were anticipated to be sufficient to reduce the slack in product and labor markets only slowly, and the unemployment rate was expected to remain elevated at the end of 2013," said the Fed.
The U.S. unemployment rate declined 0.4 percentage point to 8.6 percent in November, the lowest since March 2009. However, the key reason for the jobless rate to fall sharply was that 315,000 unemployed job seekers stopped applying for jobs, reflecting an under-performing job market as business owners were cautious about adding new people to their payroll.
Against the backdrop of slashing government outlays, employment opportunities at state and local governments declined further, and both long-duration unemployment and the share of workers employed part time for economic reasons remained high, according to Fed's top policymakers.
Initial claims for unemployment insurance have edged down since early November, but were still at a level consistent with only modest employment gains, while indicators of job openings and businesses' hiring plans were little changed, said the Fed.
With long-run inflation expectations stable and the substantial slack in labor and product markets anticipated to persist over the forecast period, top officials of the U.S. central bank predicted that the inflation would be subdued in 2012 and 2013.
Activity in the housing market continued to be depressed by the substantial inventory of foreclosed and distressed properties, and by weak demand that reflected tight credit conditions for mortgage loans and uncertainty about future home prices, noted the minutes.
The U.S. construction spending rose 1.2 percent to a seasonally adjusted annual rate of 807.1 billion U.S. dollars in November, but still remained only half of the pace considered healthy by analysts, a Tuesday Commerce Department report revealed.
Despite an array of recovery signs in recent months, many economists held that U.S. housing market would remain sluggish for several years and it would continue to dampen tax revenue and expenditures of local governments, a drag on robust economic recovery and improvement of the labor market.
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