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By Jason Stipp and Robert Johnson, CFA | 01-09-2013 11:00 AM

7 Economic Surprises for 2013

The coming year could bring some unexpected news from the Fed, on the home front, in the job market, and more, says Morningstar's Bob Johnson.

Jason Stipp: I'm Jason Stipp for Morningstar. If you thought 2012 held a few surprises for investors, just wait for 2013, says Morningstar's Bob Johnson, our director of economic analysis. He is here today to explain. Thanks for joining me Bob,

Bob Johnson: Great to be here.

Stipp: So, you say that there could be in 2013 not necessarily surprises for investors but at least potential surprises on the economic front.

You have a few of these, some of them are kind of related to each other, but let's start with the first one. It's the Federal Reserve. You said that Fed may tighten sooner than we expected. Do you think that Fed is going to start tightening in 2013?

Johnson: Well, you know what, I think by the end of the year that there will be talk of it, and there's several reasons for that. One is, I think the economy has picked up just a little bit of steam as we've seen. We've now seen from the Fed minutes that there are some disagreement about, "Should we be doing more of these bond buying or not, or maybe we've done a little bit too much." And I think they built in a little bit of extra for the fiscal cliff, and I think now they're maybe having a little regret and maybe by the end of the year things will lighten up. Really the biggest reason I'm thinking they might tighten a little bit or think about tightening or it be in the headlines is, by the end of the year, I'm thinking we may be down to 7% to 7.2% unemployment.

Stipp: So, this is surprise number two by the way. You think that we might reach a 7% unemployment rate by the end of the year. What's going to drive that?

Johnson: Yes. I think the key driver in that is going to be that we're going to have employment growth about where it's been, and we're not to going to add quite as many people to the workforce in the year ahead. I think we forget--everybody says let's just take population growth--but you really have to think about that mix of people between 22 and 62 that are the primary working age. That group actually in the year ahead begins to get really tight. We start to actually begin shrinking as the baby boomers begin retiring. So, again, the population goes up some, but the baby boomer retirement means that each year the number of people looking for work is going to be just a little bit smaller.

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