ANN ARBOR – Although talk of a double-dip recession has subsided, the U.S. economy will still only grow moderately over the next two years, economists at the University of Michigan’s Research Seminar in Quantitative Economics said Thursday.

It’s expected the U.S. Gross Domestic Product will increase 1.8 percent this year and economists said to expect about 2.5 percent growth for 2012 and 2013 apiece.

But such slow growth will only provide a slow decline in the national unemployment rate during that time. The United States has added 2.2 million jobs since 2010, but that does not make up for the 8.7 million jobs lost prior to that.

And it’s expected nearly 4 million jobs will come over the next two years. That would land the U.S. jobless rate at 8.5 percent by the end of 2013. The unemployment rate currently is 9 percent.

“Job gains have picked up a notch, consumer sentiment has recouped about half the ground lost this summer and the chances of another downturn have diminished,” said U-M economist Joan Crary. “History shows, however, that it is much more difficult to recover after a financial crisis like the Great Recession than it is after a more typical recession, and policymakers are still struggling with ways to restore balance to the economy.”

The November forecast is used in part to determine budget estimates during the January Revenue Estimating Conference. An economic outlook on Michigan will be presented on Friday.

There are many culprits to the modest economic growth predicted, especially the distressed housing market and the retraction of government purchases. Growth remains sluggish despite economists noting corporate profits as a percentage of GDP are up.

U-M economist Daniil Manaenkov noted for the first time in the post-war era, direct contribution to GDP from all levels of government “shifted into negative territory.”

While the nation has battled the foreclosure crisis since the housing market bubble burst, that is only expected to continue in the next two years.

There is even some worry that U.S. home values could continue to decline, similar to what Japan experienced beginning in the mid-1990s, but Manaenkov said the United States should be able to avoid that from happening with growth in the sector resuming a bit in 2012 and flattening back out by mid-2013.

Total housing starts for the country are expected to reach 730,000 in 2012 and 950,000 in 2013 although that is below the 1 million mark shown prior to the recession. Interestingly, Mr. Manaenkov noted that while single-family structures declined through this year and are at an all-time low of 420,000 units, the multi-family sector already has recovered.

Sales of existing homes, currently at 4.37 million units, are expected to rise to 4.87 million units by 2013.

“Recovery in residential construction investment has historically led the U.S. economy out of recessions, but this time the housing recovery has been nonexistent, resulting in subpar economic growth,” he said. “Until prices stop falling, there is a powerful incentive for qualified buyers to wait for lower prices, delaying the necessary process of clearing the excess inventory of existing houses leftover by the collapse of the bubble. The longer it takes to clear this inventory, the longer we will have to wait for the construction of new homes to pick up.”

The good news for buyers is that mortgage interest rates are expected to remain at their current low point through 2013, when a rate of 4.5 percent is expected.

Consumer consumption is expected to see moderate gains over the next two years, although much of the focus will be on replacement needs, Manaenkov said.

Peter Hooper, managing director and chief economist for Deutsche Bank Securities, said the 12.5 million light vehicle sales estimated for 2011 meets the “scrappage rate” in terms of the annual turnover in replacing cars.

But light vehicle sales should improve to 13.5 million in 2012 and 14.3 million in 2013, U-M economists noted. That is still 3 million units below the level of sales achieved in 2000.

Hooper said there is some pick up in consumer credit and the willingness of banks to lend money.

Globally, growth is expected to improve by 3.5 percent, mainly thanks to China and India. The Eurozone’s financial and political upheaval is a key opportunity for major reform, Hooper said, but will likely be a drain on the global economy and will affect the U.S. stock market as each country charts their course.

U.S. inflation is expected to rise by about 2 percent in the coming two years, which is a drop from the 3.2 percent experienced in 2011.

Economists noted that besides Europe, the actions of Congress and its budget policy could throw off the forecast. Questions remain on what the ultimate deal from the deficit reduction “supercommittee” will be, whether Congress will extend jobless benefits of whether any of President Barack Obama’s jobs plan will take effect.

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