Economists project slow recovery

WASHINGTON - The pillars of Americans' financial security, jobs and home values, will stay shaky well into 2011, according to an Associated Press survey of leading economists.

The findings point to a recovery that will move slowly and fitfully this year and next. As a result, the Federal Reserve will be forced to keep interest rates near zero until at least the final quarter of this year, three-fourths of the economists said.

The AP survey, which will be conducted quarterly, compiles forecasts of leading economists on a range of indicators. Among key findings:

The unemployment rate will stay high the next two years. It will inch down to 9.3 percent by the end of this year and to 8.4 percent by the end of 2011. The rate has been 9.7 percent since January.

Home prices will remain almost flat for the next two years, even after plunging an average 30 percent nationally since their peak in 2006.

The economy will grow 3 percent this year, less than usual during the early phase of a recovery and why unemployment will stay high. It takes growth of 5 percent for a year to lower the jobless rate by 1 percentage point, economists say.

The economy began growing again last summer, 18 months after the recession started. To keep the recovery on track, the soonest the Federal Reserve will begin raising short-term interest rates is the fourth quarter, 34 of the 44 economists surveyed told the AP. Those continued low rates will help stimulate home sales.

Economists say sales of previously occupied homes will rise to 5.4 million this year and 5.9 million in 2011. That would mark continued improvement from 2008's low of 4.9 million and in line with sales in a healthy economy.

But there's a catch. Sales are forecast to rise in part because of an anticipated wave of foreclosures. That will keep prices from rising, and consumers from spending freely.