Economists say recovery on track

Both the National Association for Business Economics and a survey of top economics forecasters done by the Federal Reserve Bank of Philadelphia featured upward revisions from previous forecasts.

The panel of 28 forecasters that prepares the association's outlook predicted that the overall economy as measured by the gross domestic product would expand by 4.5 percent next year, which would be the fastest annual growth pace in two decades.

The panel predicted growth for all of this year would come in at 3.0 percent, a rebound from last year's 2.4 percent GDP growth and a barely perceptible 0.3 percent rise in 2001, the year the country slipped into a brief recession.

The survey of 34 forecasters by the Philadelphia Fed was almost as upbeat, predicting GDP growth of 2.9 percent this year and 4.3 percent in 2004.

However, forecasters cautioned that the nation's unemployment rate, currently at 6 percent, will not come down quickly because strong productivity growth, the ability to produce more with fewer workers, would delay the need for employers to hire back laid-off workers.

The association's forecast predicted that total nonfarm employment would increase by 1.1 percent next year, or about 1.3 million workers, but this gain would not be enough to erase the 2.3 million jobs that have been lost since President Bush took office.

The Fed forecasters predicted a similar trend in employment growth, saying that payroll job losses averaging 25,000 per month this year would be followed by average job gains of 104,000 per month next year.

The forecasters credited the latest round of tax cuts pushed through Congress by President Bush and the Fed's low interest rates for a good portion of the strength in the economy. Analysts said this should translate into a good holiday sales season for the nation's retailers.

Half of the association's panel predicted holiday sales would increase by between 3 percent and 5 percent this year, while two-fifths of the panel was looking for an even stronger advance above 5 percent.

The National Retail Federation said yesterday holiday sales should rise by 5.7 percent this year over the same November-December period last year, when holiday sales turned in a weak 2.2 percent gain over the previous year.