US eco to slow down in ’10, needs more stimulus

US eco to slow down in ’10, needs more stimulus
Times of India, December 22, 2009, Page 24


Nobel Prize-winning economist Joseph Stiglitz says the US needs to prepare for a second stimulus package as there’s a “significant” chance growth will slow in the second half of 2010.

The world’s largest economy isn’t likely to expand fast enough to create jobs for new entrants into the labour force or compensate for increases in productivity that will reduce demand for workers, Stiglitz said on Monday.

“The likelihood of this slowdown is very, very high and there’s a significant chance it may be in a negative range,” he said. “If the economy recovers, we don’t need to spend the money. If you don’t prepare now and the economy turns out to be as weak as I think it will likely be, then you are in a very difficult position.”

Stiglitz’s comments echo the view of Nobel laureate Paul Krugman and counter the Obama administration’s judgment that it’s premature to consider another stimulus package after this year’s $787 billion measure. President Barack Obama has instead praised a more limited, $154 billion plan approved by the US House aimed at shoring up the job market.

The worst US recession since the Great Depression has drained more than 7 million jobs in the past two years. The government and the Federal Reserve have spent, lent or committed more than $10 trillion to revive the economy and credit markets. Employers in the US cut the fewest jobs in November since the recession began, and the unemployment rate unexpectedly fell, the Labour Department said. Payrolls slid by 11,000, and the jobless rate declined to 10%.

Federal Reserve policy makers project a decline in the unemployment rate to a range of 9.3% to 9.7% in the fourth quarter of 2010. The US economy expanded last quarter for the first time in a year, growing at a 2.8% pace as government incentives spurred consumers to spend more on homes and automobiles.

The job market is still “in very bad shape” and it is too early for the US and other countries to begin easing stimulus measures put in place a year ago to avert a financial market meltdown, Joseph Stiglitz said in October. BLOOMBERG.