World Business

AP survey: US recovery to remain sluggish into 2011

(Agencies)
Updated: 2010-04-13 14:35

Like many Americans, Michaela O'Brien of Northampton, Mass, is trying to cope with personal damage from the worst recession since the 1930s. O'Brien's husband, Nathaniel Reade, 51, lost his job two years ago as a magazine editor. Since then, they've seen the value of their home slip. So they're spending less.

Gone are the health club memberships, ski passes and camp for their two children. "We mostly cut back on what people would consider frivolous things," O'Brien says.

She gets around in a 2000 Toyota Corolla, her husband in a 13-year old Subaru.

"We hope we don't have to buy a car anytime soon," says O'Brien, 49, a self-employed publicist. Still, she says they are fortunate because they're able to pay their mortgage.

Economists say it may take until at least the middle of the decade for home values to begin rising normally again. The biggest asset for many Americans, homes have appreciated an average 4 percent a year since World War II, economists say.

National house prices have never remained flat while the economy was growing, says Mark Zandi, chief economist of Moody's Analytics, which reviewed data going back to 1969. Adjusted for inflation, however, home prices were essentially flat throughout the 1980s and the first half of the 1990s, says Zandi, who also took part in the survey.

The recession wiped out 8.2 million jobs. Zandi and other economists had previously forecast that unemployment, which reached 10.1 percent in October, would peak at 11 percent this year. Zandi now expects joblessness to climb again from the current 9.7 percent and reach 10.2 percent by December. That's because many people who have quit looking for work and aren't counted as unemployed will start looking again and because job creation will remain weak.

Employers have begun to add jobs recently, including 162,000 in March. Economists surveyed foresee additional job creation over the next three months, but not enough to reduce the unemployment rate significantly. They predict job gains of roughly 200,000 in April, 250,000 in May and 125,000 in June.

About 125,000 new jobs are needed each month just to keep up with population growth and prevent the unemployment rate from rising. To reduce the jobless rate significantly, employers would need to consistently add 200,000 to 300,000 a month.

"The labor market is the scar left over from the economic trauma that we've been through," says Sean Snaith, economics professor at the University of Central Florida, who took part in the survey. "It will be slow to fade."

Ann DeRoo, 40, of Fairfield, Ohio, began digging into savings to pay home and car loans after her husband was laid off from a trucking job earlier this year. DeRoo, who has three children, has also put off buying new clothes or shoes. Her son, who graduates from college in June, may have to move back home if he can't find a job.

"We just have to really watch what we're doing and worry about getting through today," DeRoo says.

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