Economists foresee only tepid growth for the coming year, with unemployment back above 8 percent for the first half of 2013.
The good news: The housing market is recovering faster than expected and the economy likely won't fall off a "fiscal cliff."
The quarterly survey by the National Association for Business Economists released Monday predicts growth will be weak overall but should slowly accelerate through 2013.
The 44 economists surveyed now see gross domestic product — the value of all goods and services produced in the United States — rising just 1.9 percent in 2012 before reaching a 3 percent pace by the fourth quarter of next year.
Employment growth is forecast to weaken. The panel predicts that the unemployment rate will rise to 8.1 percent by the end of the year. The economy should add an average of 125,000 jobs per month during the fourth quarter, down from the economists' May forecast of 190,000 jobs.
The unemployment rate, the most-watched measure of the country's economic health, has been a prime issue in the presidential election campaign. It fell to 7.8 percent in September. But before that the rate was 8 percent or higher for 43 months, a streak that Republican challenger Mitt Romney had been emphasizing in his effort to unseat President Barack Obama.
The NABE survey results hint at the possibility the rate could rise back to the 8 percent level when the October jobs report comes out Nov. 2, four days before the election.
The organization is made up of business economists and others who use economics in the workplace.
The economists, who were surveyed Sept. 14-26, revised upward their previous estimate for single-family housing starts and now expect them to increase 23 percent to 750,000 units in 2012. Continued improvement is seen in 2013 with a 13 percent rise to 850,000 units.
Home prices are now projected to rise by 1.5 percent in 2012 and 2.8 percent in 2013, more than the economists expected in their May forecast.
A widespread concern about the economy has been the combination of about $1.2 trillion in spending cuts and tax increases that will kick in starting next year, risking a giant fiscal shock if Republicans and Democrats don't reach a deal on a budget. But a majority of the economists are confident that won't occur.
"The panelists' projections for the fiscal cliff are very diverse, though survey respondents in general do not expect the potentially large negative outcomes of the fiscal cliff to materialize," said Shawn DuBravac, chief economist at the Consumer Electronics Association, who analyzed the results for the NABE.
Fifty-five percent of the economists surveyed said they think the so-called Bush tax cuts will be held in place for another year for all income levels, while another 36 percent believe they will be extended only for lower income brackets. And 77 percent of the panelists said they think the automatic spending cuts will be greatly diminished by subsequent legislation.
The economists also forecast that:
- Inflation will remain low next year. The Federal Reserve's preferred measure is seen rising 1.9 percent in 2013 while the core Consumer Price Index, which includes spending on everything except food and energy, is projected to increase 2.2 percent.
- Consumer spending will be weak. The panel revised its forecast for growth in consumer spending downward to 1.9 percent in 2012 and 2 percent in 2013, reflecting slow personal income growth and limited job gains.
- Longer-term interest rates should rise. The yield on the 10-year Treasury note, now 1.66 percent, is forecast to climb steadily to 2.3 percent during the fourth quarter of 2013 as the Fed draws nearer to reversing its policy of extraordinarily low short-term rates.
- Stocks will rise modestly. The Standard & Poor's 500 index is predicted to be 1,450 at year end and 1,520, or 5 percent higher at the end of 2013. The key market barometer is currently 1,429.
- Corporate profit growth will show moderate but less-than-average increases. After-tax corporate profits are projected to rise 7 percent this year and 5 percent next year, below the 10.2 percent average of the last 20 years.
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Incoming NABE President Kenneth Simonson, and CNBC's Steve Liesman, break down the latest NABE data on the outlook for the U.S. economy.