Economic growth to slow, OECD says

PARIS - The U.S. economy will grow only 2.6 percent this year, less than the 3.2 percent previously forecast, an international agency predicted Monday, as sluggish demand hampers efforts to recover from the recession.

The Organization for Economic Cooperation and Development also warned in its latest economic survey of the U.S. that contrary to prior recessions, the 2007-2009 recession may trigger long-term damage to the economy, with higher unemployment.

In its report, published every two years, the OECD said the economic recovery was progressing, but that "it could be early 2013, at best" before unemployment returns to its pre-recession level.

The report came on the same day that the arbiter of U.S. economic dowturns declared that the recession ended in June 2009, 18 months after it began. But the National Bureau of Economic Research cautioned that its determination did not mean the economy was back to where it was before the recession.

In its outlook, the OECD also cut its 2011 growth forecast to 2.6 percent from its previous 3.2 percent forecast.

The downgrades followed the OECD's lowering earlier this month of its forecast for the Group of Seven industrialized countries. It said the G-7 will grow by around 1.5 percent on an annualized basis in the second half of 2010 - down from its previous forecast of 1.75 percent in May. The G-7 comprises the U.S., Britain, Canada, France, Germany, Italy and Japan.

In the U.S., OECD said the economic recovery is being restrained by Americans paying down debt and a decline in household net worth. The rebound also will be slower than in past recessions because of tighter credit conditions, the OECD said.

The jobless rate will average 9.7 percent this year and 9.0 percent in 2011, according to OECD.

Angel Gurria, secretary-general of the OECD, said in New York that he doesn't see a recovery that is sufficiently robust to bring the U.S. unemployment rate down to pre-crisis levels in the next couple of years.

Some additional government support for the labor market may be warranted, the OECD said. While extending unemployment benefits has helped the economy, phasing them out as the labor market improves will support growth and employment, encouraging more jobless Americans to seek work, according to the OECD.

OECD, based in Paris has 33 member countries and aims to support sustainable economic growth.