US job creation to boom as government slashes spending

The US economy is on the path to strong job growth and higher wages, according to the National Association of Business Economics (NABE) quarterly survey.

Unemployment will continue to fall with 200,000 jobs being added every month. As job creation increases workers will see more rapid wage growth, from 1.8 per cent in 2013 to 2.4 per cent in 2014.

NABE estimate that consumer spending will grow at a modest 2.4 per cent next year after rising 1.9 per cent in 2013. The group lowered its forecast for GDP growth from the three per cent forecast in September, to 2.8 per cent.

90 per cent of the economists surveyed said they expected to see further cuts in government spending. However, reductions in government spending are not expected to have a dramatic impact on the economy. Three quarters of those surveyed said they did not expect spending cuts to have an impact greater than 0.5 percentage points of GDP growth.

In 2013 cuts in government spending managed to slash the US budget deficit. The budget deficit fell from $1.1 trillion in the fiscal year 2012 to $680bn in the year ended October.

Accompanying most analysts, the NABE survey overwhelmingly expects the Federal Reserve to begin tapering next year. Two thirds of the group believe the Fed will begin tapering in the first quarter of 2014.

The forecasts assume there will be no repeat of the government shutdown seen in October. The survey included 51 economists and was conducted between 8 November and 19 November.