NEW YORK -- High unemployment and slow growth may be the new normal for the U.S. economy, according to leading experts at the Conference Board, a global economic research association.
The Conference Board projects that the U.S. economy will take years to recover from the recent recession and is unlikely to regain the growth or employment rates of the pre-recession era even a decade or more in the future, the group's chief economist, Bart van Ark, said Thursday. While a revolution in information technology and rapid development of emerging economies like China made for unusually high U.S. growth for much of the past 20 years, van Ark said, it is far from clear that such trends will continue at a comparable pace.
The U.S. economy will grow at a rate of just 1.1 percent in 2012, according to Conference Board estimates released in the group's annual global economic outlook report, not enough to keep pace with population growth. With the United States and eurozone leaders pursuing austerity models, van Ark said, a Japan-style lost decade should come as no surprise. "This will be an environment in which we are not going to see the recovery that we expect in 2013 to 2016," he said.
During that period, the board projects a still-slim 2.4 percent growth. Its forecasts don't get sunnier in the medium term, either: the board estimates just 2.3 percent growth in the decade from 2016 into 2025 -- a full percentage point lower than the U.S. economy's growth rate in the decade from 1996 through 2005.
Slowing growth among current emerging economies is a primary factor, the board's economists said. The group estimates that growth in China will slow dramatically beginning next year, from an average of 10.9 percent over the past five years to 8.7 percent in 2012 and just 3.5 percent by 2025. The global economy is projected to grow approximately 3 percent annually between now and 2025, in contrast to 3.6 percent growth from 1996 through 2005.
Van Ark said he is less concerned about the Europe crisis' ripple effects in the United States, since American exports to Europe are not a critical component of the U.S. economy. If there is a breakup of the eurozone, however, America would almost immediately plunge into recession, he said.
In order to contain the crisis, he said, European leaders need to agree to credible debt reduction plans lasting for five years or longer. "I say don't worry about contagion," he said. "It is happening exactly right now."
But for now, van Ark said, U.S. growth is more seriously threatened by domestic unemployment and crippling household debt, which has limited consumer spending.
Conference Board economist Ken Goldstein said consumer demand, which comprises 70 percent of the U.S. economy, is not likely to recover soon, since fewer young adults are forming new households and households are saving more.
The board is more bullish on America than Europe, though, which van Ark attributed to greater U.S. market efficiency. To equal it, he said, European nations will need to implement significant structural reforms.
"The problem in Europe," he said, "is that they still have trouble doing that."