IMF lowers estimate of US economic growth in 2014

Published on NewsOK Modified: June 16, 2014 at 2:51 pm •  Published: June 16, 2014
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WASHINGTON (AP) — The U.S. economy is poised to accelerate after a dismal start to the year even though the job market won't return to full employment until 2017.

That was the forecast offered Monday in a report by the International Monetary Fund.

The IMF noted that steady job gains and other recent data suggest that the economy is rebounding. Employers have added 200,000-plus jobs for four straight months, and the unemployment rate has fallen to 6.3 percent. Auto sales and factory activity are increasing.

Yet growth in 2014 won't likely top last year's lackluster performance, the IMF says. The Washington-based organization foresees the economy growing a modest 2 percent in 2014, below its previous estimate of 2.7 percent. That would be nearly identical to the 1.9 percent growth in 2013.

The IMF blames the lingering aftermath of the brutal winters and a sluggish recovery in home sales. Years of disappointing growth mean the economy might not reach full employment — which many economists say is when the unemployment rate is between 5 and 5.5 percent — for three more years.

Christine Lagarde, the IMF's managing director, suggested at a news conference that the past winter shows that another wild card might be holding back the economy and could make predictions more difficult: climate change.

"Extreme weather occurrences have repeated much more frequently in the past 20 years than the previous century," she stressed. "That's a reason to wonder about climate change and how to deal with it."

Yet the IMF is optimistic that a "renewed dynamism" will propel growth for the rest of 2014, partly offsetting what many analysts think was a contraction of up to 2 percent last quarter.

The unemployment rate has tumbled to 6.3 percent from 7.5 percent in 12 months, evidence of that momentum.

But the IMF cautions that U.S. wages remain stagnant and the rate of long-term unemployment high. As a result, it urged lawmakers to lift the minimum wage and increase the Earned Income Tax Credit for those with low wages.

The IMF projects that growth will reach 3 percent in 2015, roughly matching the United States' average rate of expansion between 1948 and 2007. But even the 2015 estimate was a downward revision from the IMF's previous forecast that growth next year would be 3.5 percent.

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