The economy may seem vibrant, as shown by Friday's strong employment report, but many economists continue to anticipate lower interest rates a year from now.
The bank prime lending rate will be about half a percentage point below where it is now, and longer-term rates will be even lower, according to the consensus view of the latest American Banker yield and rate survey.
Some seasoned watchers of business conditions, such as Anthony Chan of Banc One Investment Advisors, see a fairly strong chance of recession next year. Mr. Chan expects a 6% government bond yield and 7% mortgage rate by June 1997.
Others glimpse a slackening in the economy's growth to a walking pace, with further diminishing of inflationary pressures.
Economist Ram Bhagavatula of New York's Citicorp foresees considerably lower short-term rates, including a 4% rate for federal funds, the overnight rate for interbank lending that is set by the Federal Reserve.
David Orr, chief capital markets economist at First Union Corp., is forecasting the lowest long-term rates, a 5.7% yield on the Treasury's 30- year "long bond" and 6.75% rate on 30-year mortgages.
Philip Braverman, the veteran chief economist at DKB Securities USA, a subsidiary of Dai-Ichi Kangyo Bank, also sees a government bond rate below 6% next year. His estimate is 5.95%.
Some economists, including those at Fleet Financial Group, believe the economy recently shifted gears. "Data for the beginning of the second quarter already show a slowing," they said in the bank's weekly economic newsletter.
"In the first quarter, personal consumption grew at a 3.6% pace after inflation, a rapid expansion after the fourth quarter's 1.2% growth rate," they wrote. "However, real spending actually fell in April."
For instance, April sales of light vehicles were 5% below the first- quarter average and 9% below March's level. Meanwhile, consumer expectations fell in April and again in May.
In addition, chief economist Lacy H. Hunt of HSBC Markets Inc. noted that both commercial and consumer lending by banks continued to subside through mid-May.
This sluggishness suggests, he said, "that the extent of the inflationary concerns existing in the credit markets may ultimately prove to be unwarranted."
To be sure, a significant school of economists has a very different view. These analysts are worried about a resurgence of inflation and see rates rising rather than falling.
Charles Lieberman of Chase Manhattan Corp. and Dana Johnson of the First Chicago Capital Markets unit of First Chicago NBD Corp. expect a 6% federal funds rate and 9% bank prime rate a year from now. They also anticipate a 7.5% long bond yield and 8.5% mortgage rate.
Going even further, David Greenlaw of Morgan Stanley & Co. forecasts a 6.25% funds rate, 9.25% prime rate and 7.95% long bond yield.
In the jobs report, May nonfarm payrolls rose 348,000, more than double the 163,000 most economists had expected. Rates jumped in reaction to the sign of economic vitality.