US economists increasingly optimistic about year ahead, with employment seen improving

NEW YORK, N.Y. - Economists in the U.S. are increasingly optimistic about growth in the year ahead, with hiring expected to pick up in coming months.

A quarterly survey by the National Association for Business Economists released Monday shows half of the economists polled now expect real gross domestic product — the value of all goods and services produced in the United States — to grow between 2 and 4 per cent in 2013. That's up from 36 per cent of respondents who felt the same way three months earlier.

About half expect sluggish or negative performance, down from 65 per cent in October.

The latest survey was conducted between Dec. 20 and Jan. 8 and asked 65 economists and others who use economics in the workplace about conditions at their firms or industries. It found that 34 per cent of firms now expect to expand their payrolls in the next six months, the highest percentage since April of last year. Meanwhile, 2 per cent said they expect their companies to cut payrolls through layoffs, while 14 per cent see payrolls trimmed through attrition.

A quarter of respondents also said employment grew at their firms in the fourth quarter, which is comparable to the levels seen in the first half of 2012. The same percentage also reported a rise in wages at their firms in the final three months of the year, up 10 percentage points from the last survey.

Overall sales growth was stable in the fourth quarter, with results mixed across industries. For instance, growth slowed in the services, finance, insurance and real estate sectors, but it rose in the transportation, utilities and information and communications sectors.

Timothy Gill, chair of NABE's survey committee and director of economics at the National Electrical Manufacturers Association, noted that sales growth was stable despite "widespread uncertainty surrounding the potential impact of the fiscal cliff."

The "fiscal cliff" refers to the steep tax hikes and spending cuts that were to take effect Jan. 1 unless the White House and Congress reached an agreement to avoid them. A modest agreement on taxes was reached, but a debate on spending cuts looms in the weeks ahead.

The survey found that 27 per cent of respondents postponed at least some hiring and capital spending during the quarter as a result of the uncertainty, while 72 per cent said the issue didn't affect hiring.

Despite stable sales growth, survey respondents noted that profit margins deteriorated in the fourth quarter, with 25 per cent saying their margins increased, down from 27 per cent in October. On the other side, 18 per cent reported declining profit margins, compared with 15 per cent a year ago. Over the next three months, slightly more than a third said they expect primary non-labour costs to rise. That's down from 43 per cent in the previous survey.

Expectations for capital spending over the next year weakened from the last survey. Only 40 per cent expect their firms to grow capital spending, down from 52 per cent.

For consumers, the survey suggests modest inflation could be in the works, with two-fifths of respondents — the highest share over the past year — saying they expect prices to rise in coming months. Most of those expecting hike prices think the increases will be less than 5 per cent.