U.S. Economy
- The 18-month-old recovery will gain strength in 2011, although the pace of growth will remain moderate compared with that of prior rebounds.
- Key underpinnings of growth include business and consumer spending, U.S. exports, and increased hiring; with additional support provided by the federal tax cut package enacted at the end of 2010.
- Major risks to the economy could develop if energy prices jump, business remain reluctant to add workers, or the European debt crisis becomes widespread.
Labor Markets
- Employment gains will average 156,000 jobs per month in the first six months of 2011, accelerating to 193,000 jobs per month in the second half.
- The unemployment rate will decline gradually during the year but remain high, averaging 9.5 percent in the first half and 9.2 percent in the second half.
- Private sector workers' total hourly compensation will grow 2.2 percent in 2011, up from a 2.0 percent hike in 2010, as of the third quarter.
Monetary Policy
- Inflation is expected to stay tame, well below the Federal Reserve's preferred rate of about 2 percent.
- The Fed is expected to complete its planned purchase of $600 billion of Treasury debt by June 30, but is unlikely to expand the program.
- The central bank is likely to maintain its historically low, near-zero federal funds rate target for all of 2011.
World Economy
- The global economy is expected to continue expanding in 2011, although at a moderate pace in most countries.
- U.S. and European economies are expected to show more momentum and build on growth in 2010.
- Analysts see potential for surprises on upside with possibly higher than expected growth in some economies and higher inflation in emerging markets.
