5 Reasons the Economy Will Be Better in 2012

2011 has been a rough year, but economists think next year will be better.

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[Read: Is the Rising Star of U.S. Manufacturing Fading?]

Improving employment outlook. After remaining virtually frozen for several months, the unemployment rate is inching downward, with the latest outlook for the jobs market buoyed by better-than-expected unemployment insurance claims numbers. Fewer people are seeking unemployment benefits, which could translate into a lower unemployment rate come December.

NABE economists expect unemployment to dip below the 9 percent mark to 8.7 percent, a drop that could spark a renewed sense of confidence in the economy. Jobs gains should increase steadily over the next several months, from 100,000 jobs created on average in the fourth quarter of 2011 to around 130,000 by the end of 2012. Nevertheless, economists still cite unemployment as a major concern for the economy going forward, especially if the rosier predictions don't pan out.

Housing starts increase. Although 2011 is shaping up to be the worst year on record for the single-family housing market, the multi-family market, which makes up about one third of the housing market stock, is slowly coming back to life. That could be the prelude to a broader housing market recovery if economists' predictions are right.

Most economists don't see the housing market really gaining steam until 2013, but 2012 will build the fundamentals needed for recovery in 2013. "We see the housing market improving slowly going forward, with single- and multi-family housing starts, new home sales, and existing homes sales all higher in 2012 than in 2011," Patrick Newport, IHS Global Insight U.S. economist, wrote in a recent report, adding that prices will likely hit bottom in 2012.

mhandley@usnews.com

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