-- U.S. will grow 2.4% in 2012, 2.6% in 2013, forecasts OECD
-- Jobless rate to fall to 7.4% by end-2013, says OECD
-- OECD sees U.S. fiscal consolidation less of a drag than many private economists do
NEW YORK -- The U.S. economy is likely to grow above its potential through 2013, drawing down the unemployment rate to 7.4%, according to new forecasts by the Organization for Economic Cooperation and Development.
The May OECD forecasts, released Tuesday, project U.S. real gross domestic product will grow 2.4% this year and 2.6% in 2013, much better than the 1.7% posted in 2011. Although housing will remain a drag on growth, the OECD says improving labor markets and better credit conditions will support domestic demand going forward.
The report also projects the U.S. jobless rate will fall to 7.9% in the fourth quarter of this year and 7.4% by end-2013. That would be the lowest rate since late 2008.
Inflation will hover around 2% over the two-year forecast period, projects the OECD, close to its current rate.
Two risks hang over the outlook, said Wendy Dunn, economist for the U.S. at the OECD. First is the possible fallout to the U.S. banking system and consumer and business confidence from the euro-zone debt crisis.
Second is the uncertainty about U.S. fiscal policy surrounding prospective tax hikes and spending cuts as required by current law. Some economists have projected this fiscal consolidation could cut as much as 4 percentage points from GDP growth early next year.
Dunn said the OECD expects a more modest alternative path for fiscal policy which would reduce the underlying primary federal deficit by only 1% of GDP in 2012 and 1.5% in 2013.
The May OECD projections are more optimistic than those released in November. Back then the OECD projected U.S. growth of 2.0% in 2012 and 2.5% in 2013, with the jobless rate ending 2013 at 8.4%.
-By Kathleen Madigan, Dow Jones Newswires; 212-416-2466; kathleen.madigan@dowjones.com
