The housing market has rebounded this year as more people compete to buy… (Patrick T. Fallon, Bloomberg )
The U.S. housing market is becoming the leading source of strength for the long-sluggish American economic recovery, outpacing both business investment and exports. But even with the return of that crucial linchpin, job growth is expected to remain weak next year, a new report says.
Job growth will be muted in coming months as employers turn to automation to perform tasks and look for highly skilled workers to fill available jobs, said Edward Leamer, director of the UCLA Anderson Forecast.
In a quarterly report released Wednesday, UCLA forecasters expect moderate U.S. economic growth next year, presuming a "benign resolution" to the set of tax increases and large automatic spending reductions that kick in beginning Jan. 1, known as the "fiscal cliff."
Even if Congress and the president were to reach a compromise, the U.S. economy isn't likely to grow at an annualized rate of more than 2% during the first half of 2013. As the year progresses, and with housing and consumer spending predicted to play an increasingly larger role in the recovery, annualized growth isn't expected to reach much above 3%, according to the forecast.
"We think the job market will improve somewhat, but we don't think the unemployment rate is going to be driven down very rapidly," Leamer said. "We have too many Americans without the necessary skills."
If Congress and the White House reach a fiscal cliff compromise, the report forecasts, the unemployment rate will remain close to 8% next year but fall to 7.2% by the end of 2014 as the jobs engine picks up steam.
If Washington can't reach a compromise, the Congressional Budget Office has predicted, the U.S. will plunge back into recession next year with the unemployment rate rising to 9%.
Even if the fiscal cliff is avoided, growth in the U.S. will remain tempered by economic stumbles abroad. The report notes that both Europe and Japan are in recession, while the economies in Brazil, China and India are slowing. Those factors will hurt U.S. exports.
The results of a fiscal cliff compromise also will be a drag on growth as spending cuts and tax increases will hold back economic activity.
And although job growth will probably improve across the board as the economy recovers, that improvement will be muted by automation, Leamer said. Employers have been forced to cut costs during the economic downturn, increasing the use of computers and technology to replace administrative assistants, cashiers and laborers. Many of these jobs may never come back
Housing will be a steady driver of the economy, the report says, a change from the last three years, when business investment and exports grew and housing and consumer spending lagged behind. Although late to the recovery, housing has "become the leading source of strength," the report said.
Housing has rebounded this year as more people compete to buy fewer homes.
Interest rates remain near record-low levels, luring buyers. And investors with cash have poured into the market, looking for cheap properties to flip or rent. At the same time, the number of foreclosures has declined, tightening the supply of cheap homes.
An economic report by PNC Financial Services released this week suggested much of the same.
"Manufacturing had been leading the recovery due to strong business investment, exports and an improvement in vehicle sales," the report said. "Manufacturing will continue to expand in the near term, but the industry has moved from leading the overall recovery to keeping pace with it. However, construction will be more of a growth driver in 2013. Home building is in recovery."
UCLA forecasters expect the Golden State's growth to outpace the nation's over the next two years.