Economic outlook

Economists are less optimistic about the pace of recovery than they were three months ago.

The 42 economists in the AP Economy Survey believe that the economy will grow at a rate of less than 3 percent for the April-through-June quarter. That is down from the 3.7 percent rate predicted three months ago. The report is similar to another survey of economists reported recently in USA Today.

Although most of the economists say the recovery is "on track," a lack of confidence in the economy is keeping employers from hiring and consumers from spending. Also, the housing market has weakened nationally now that the homebuyer tax credit has expired.

But state spending is also clouding the recovery. With the loss of revenue, states are cutting services and laying off workers. Two-thirds of the economists see that as a "significant" or "severe" risk to the economy.

The tight job market, lack of raises and fear of layoffs have consumers spending less and saving more.

Economists predict a 3 percent growth rate for next year, which is weak by historic standards. The reluctance to spend more presents a "significant" or "severe" risk to a recovery, the economists said.

At the same time, the 4.2 percent savings rate for last year was the highest since 1998, and the economists expect it to continue through this year and into the next. Americans are feeling safer with their money in the bank.

But without the growth, unemployment is likely to stay high. A 5 percent rate of growth for a full year is needed to reduce the unemployment rate, now at 9.5 percent, by 1 percentage point.

Such an outlook could determine the fate of elected officials facing the voters this fall.