US unemployment rates are set to drop significantly in the coming months, providing a powerful boost to President Barack Obama's re-election prospects.
While hiring in the US through the rest of 2012 will lag the brisk pace set early this year, 32 economists surveyed by the Associated Press, reveal that recruitment will be strong enough to push the unemployment rate below 8 percent by Election Day.
According to the AP survey, the US economy has entered a "virtuous cycle" in which hiring boosts consumer spending, which fuels more hiring and spending, despite negative points, such as high gas prices, Europe's debt crisis and a weak housing market, creating a dampening factor.
The survey, which comes just before the highly anticipated April month US non-farm payrolls report on Friday, reveals that economists think the recovery will manage to reduce unemployment to 7.9 percent by Election Day from 8.2 percent in March. The Election Day forecast is substantially below unemployment figures in November 2010, which stood at 9.8 percent.
While the prediction could give President Obama a major boost in the upcoming elections, the economists think it will be at least three more years before they see a key signal for a healthy economy, which is marked by an unemployment rate of below 6 percent. The AP report added that "since 1956, no president has lost re-election when the unemployment rate dropped in the two years before the election and that none has won when the rate rose over that time."
The economists predict that the economy will grow 2.5 percent this year, up from 1.7 percent in 2011. But although the economists say a "healthy economy" usually possesses a 2.5 percent rise in annual growth, the 12.7m people that are unemployed offset this. They added that the economy would have to grow about 4 percent for a year to lower unemployment another percentage point.
"The economists expect job growth to average 177,000 a month from April through June and 189,000 in the second half of the year," said the report. "That would be down from an average 212,000 jobs added monthly from January through March. Last year, job growth averaged 158,000 a month."
The survey results come before a report Friday on hiring during April. The April report is eagerly awaited because employers added surprisingly few jobs in March.
Meanwhile, European stocks have dropped after US companies added the fewest number of workers in seven months in April, according to a private report. Figures from Roseland, New Jersey-based ADP Employer Services revealed that employment only increased by 119,000, following a revised 201,000 gain the prior month.
The median forecast of economists surveyed by Bloomberg called for a 170,000 advance, while Reuters expects the same estimate. However, Reuters did emphasise that the numbers could "disappoint following a poor reading of U.S. private sector's jobs data in the previous session."