Darda Says U.S. Economy May Expand 4% This Year
The U.S. economy will grow 4 percent this year, said Michael Darda, chief economist at MKM Partners in Greenwich, Connecticut, mirroring rebounds from recessions in the 1970s and 1980s.
Darda said growth will be ignited by the “initial spark” from a recovery in capital markets and corporate earnings, as well as the rebuilding of business inventories. The job market will recover more slowly, with the unemployment rate falling to about 9 percent by the end of this year from 10 percent in December, Darda said.
“If you look at the tone and tenor of indicators that tell us where the economy is going in the future, they’ve all improved fairly dramatically,” Darda said in an interview today on Bloomberg Radio.
The index of U.S. leading indicators increased more than anticipated in December, a sign the economy will keep growing through the first half of the year, the New York-based Conference Board said today. The board’s gauge of the outlook for the next three to six months rose 1.1 percent, the most in three months, after climbing 1 percent in November.
Darda’s outlook for the economy is more optimistic than the median forecast in this month’s Bloomberg survey of economists, which calls for growth of 2.7 percent in 2010 after a contraction of 2.5 percent last year.
A recovery from the deepest recession since the 1930s will do little to bring down an unemployment rate that’s close to a 26-year high, according to the survey fast cash now.
Labor Market Outlook
Unemployment is forecast to average 10 percent this year, the highest annual rate in seven decades. Employers have cut more than 7.2 million jobs since the recession began in December 2007.
“When you are coming out of such a deep, deep hole it takes time” for the labor market to heal, Darda said. “You could have a rip-roaring recovery and still not get unemployment to a level you would consider full employment.”
The Federal Reserve will probably keep its benchmark interest rate close to zero through the third quarter of the year in a bid to bring down unemployment. The rate-setting Federal Open Market Committee next meets Jan. 26-27.
The Fed’s regional economic survey, the Beige Book, reported the economy improved in 10 of the central bank’s 12 districts. The survey was released Jan. 13.
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