Former Fed official predicts bold economic recovery

The U.S. economy is on the verge of a robust recovery with massive job creation, according to Alan Blinder, former vice chairman of the Federal Reserve Board.
"You have probably heard a lot of doom and gloom lately, including talk of a jobless recovery, an L-shaped recovery, which means no recovery at all, or even a W – the feared double-dip recession," Blinder wrote recently in The Wall Street Journal. "The Scrooges have a point: There are serious dangers to the nascent recovery. But you’ve heard all that many times. Let me offer
instead, in deliberately one-sided fashion, the case for optimism. It is, after all, the holiday season."
Blinder predicts an economic rebound, which started with a rise in gross domestic product (GDP) in the third quarter.
"Like a woozy prizefighter lifting himself off the canvas, the battered investment component of GDP managed to rise at an 11 percent annual rate, which added 1.3 points to GDP growth rather than subtracting 5.4 points," he wrote. "That 6.7 point swing was the start of the slingshot effect, which is not yet over. While payrolls continued to decline in November, it was by only a scant 11,000 jobs, and the job counts for September and October were revised upward. The data now shows a clear trend that suggests that net job creation may be only a month or two away."
Blinder added, "There is more to the case for optimism. For one thing, less than 30 percent of February’s $787 billion fiscal stimulus has been spent to date; over 70 percent is still in the pipeline. Pessimists dote on the fact that the rate of increase of stimulus spending has probably peaked and will be lower in 2010. True. But the level of GDP will continue to get support from fiscal policy, and a second job-creation package looks to be in the works."
To read Blinder’s full forecast click here.

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