NEW YORK (Reuters) — Economists trimmed their forecasts for U.S. economic growth in the first quarter of the year, with payroll expansion seen remaining somewhat subdued, but they expect the pace of activity to pick up in the second quarter.
Analysts see the economy growing at an annual rate of two per cent in the current quarter, down from a previous estimate of 2.5 per cent, according to the Philadelphia Federal Reserve's quarterly survey of 45 forecasters, released on Friday. Second-quarter growth was forecast to accelerate to three per cent, up from a prior forecast of 2.9 per cent.
The economy is expected to grow at a rate of 2.8 per cent for all of 2014, versus a previous estimate of 2.6 per cent in the previous survey in November. Growth in 2015 is expected to accelerate to 3.1 per cent.
The pace of hiring was expected to slow in the current quarter compared with previous expectations, with an average rate of monthly non-farm job growth seen around 177,400 versus a previous forecast of 187,000. That is expected to pick up in the second quarter, averaging 193,500, unchanged from prior forecasts. Hiring should average 187,700 for all of 2014, compared with the prior full-year forecast of 189,900.
The jobless rate was expected to be 6.7 per cent at the end of the current quarter and 6.6 per cent by the end of the second quarter.
The most recent official unemployment rate released by the government showed the jobless rate in January dropped to 6.6 per cent, the lowest in more than five years.
The Fed has promised to hold interest rates near zero until unemployment hits 6.5 per cent, provided the outlook for inflation stays under 2.5 per cent. Some policymakers have begun to agitate for the central bank to jettison those guideposts given how close the unemployment rate has come to the threshold even as the Fed has not yet completed winding down its massive bond-buying stimulus.
Inflation was expected to remain muted, with year-on-year core consumer price inflation, which strips out food and energy costs, averaging 1.8 per cent in both the first and second quarters, compared with previous estimates of 1.9 per cent for each period.
Looking at the inflation measure most closely tracked by the Fed, the core personal consumption expenditures, or PCE, index, forecasters also see muted price pressures ahead. The first quarter rate was seen at 1.5 per cent versus a prior estimate of 1.7 per cent. The second-quarter rate was also forecast at 1.5 per cent, down from 1.8 per cent in the November survey.