U.S. Economic Expansion to Quicken in 2014

That is the forecast from the National Association of Business Economists (NABE) published in its Outlook for March. Real gross domestic product is expected to grow by 1.9% in the first quarter, but by the end of the year the group expects the pace of growth to be above 3%. Here is what the NABE’s president had to say:

On an annual average basis, real GDP growth is forecasted to increase from 1.9% last year to 2.8% this year, and to 3.1% in 2015. Conditions in a variety of areas — including labor, consumer, and housing markets — are expected to improve over the next two years, while inflation remains tame.

The NABE’s Outlook presents the consensus of macroeconomic forecasts from a panel of 48 professional forecasters.

The panelists expect the Federal Reserve to end all asset purchases by the end of 2014 as the taper arrives at its logical end-point.

Higher interest rates are also on tap, with a third of the NABE panel anticipating a hike in the federal funds rate this year and more than half expecting a rate hike in 2015. The panel believes that rising interest rates pose the greatest threat to the expansion of the U.S. economy over the next two years.

Worries over a recession are mild. When panelists were asked to estimate the probability of a recession in the next two years, the median response was just 15%.

On the jobs front, the NABE panel forecasts nonfarm payrolls to post an average gain of 188,000 per month in 2014 and 205,000 in 2015. The average monthly gain in 2013 was 194,000. The unemployment rate is expected to decline to 6.4% in 2014 and 6.1% in 2015.

The NABE forecast aligns pretty well with the general view of the U.S. economy for the next two years. The group does appear to believe more strongly than most that the Federal Reserve will raise its fed funds rate this year. That may happen, but it better happen soon. As the November elections approach, the chances of a rate hike diminish because the Fed is typically sensitive to the charge of playing politics if it makes a big move near an election.