The nation’s top economists forecast that the economy will grow a robust 7.2% in 2021, before easing to a 3.1% growth rate in 2022, according to the American Bankers Association’s Economic Advisory Committee. The committee—which is made up of 17 chief economists from some of the largest U.S. banks—said it expects that the unemployment rate will decline to 5% by the end of the year from the present rate of 6.1%, as more than 550,000 new jobs on average are expected to be added monthly. In 2022, the committee expects unemployment to reach what it considers full employment at 4%, with an average of about 300,000 monthly job gains.
“Since the committee met in January, further federal stimulus and a tremendously successful vaccine rollout are fueling the fastest economic recovery in 75 years,” said EAC Chair Beata Caranci, SVP and chief economist at TD Bank Group. “There is a high degree of confidence within the committee that a vigorous expansion will continue to unfold as consumers unleash pent-up demand in the months ahead.”
The committee forecast that inflation will remain elevated by the end of the year, due to temporary supply-side constraints and strong demand, but viewed increased inflation as largely transitory. “We believe the Federal Reserve will succeed in achieving sustained inflation in excess of 2% under its average inflation target objective. The Fed should begin tapering its nearly $8 trillion portfolio no later than the first quarter of next year,” said Caranci.
The 30-year mortgage rate is expected to rise from 3.1% now to 3.3% in December and 3.6% a year later, according to the EAC forecast. Average existing home prices are expected to rise 9.8% this year and 3.8% next year.