Bloomberg BNA Outlook Predicts Moderate Economic Growth in 2013

A strengthening private sector should give the economy a boost in the second half of 2013 after a slow start, according to ""Bloomberg BNA's"":http://www.bna.com/ annual Economic Outlook.

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The forecast--a consensus projection from economists at 21 leading financial, consulting, and academic organizations across the country--calls for a temporary slowdown in economic growth in the first half of the year as the country feels the impacts of the payroll tax hike and other major shifts in federal fiscal policy.

However, growth is expected to improve as consumer spending, job creation, business investment, and the ongoing housing recovery provide lift to the economy.

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As a result, job growth gains are expected to be modest in the first half of the year, accelerating to 176,000 jobs per month in the latter half.

The unemployment rate, the economists agree, will continue on its ""gradual downward slope,"" dropping from 7.8 percent at the end of 2012 to 7.5 percent on average in the second half of 2013, the outlook says.

At the same time, hourly compensation for private sector workers is expected to grow 2.6 percent, up from 2.0 percent as of 2012's third quarter.

In the area of monetary policy, the outlook calls for more of the same: The Federal Reserve will maintain its historically low federal funds rate target at least through the end of the year, and the ongoing quantitative easing program will likely last into 2014. Inflation is also expected to stay ""tame"" near the Fed's preferred rate of about 2.0 percent.

The biggest threat to this outlook, analysts said, is the potential for ""a damaging federal budget crisis if President Obama and congressional Republican leaders cannot reach agreement on the debt ceiling increase and a long-term deficit reduction plan.""

On the other hand, they note that ""downside and upside risks are more balanced than a year ago, and stronger-than-expected growth is possible, notably in the U.S. housing and labor markets.""