Tags: Roubini | us | economy | fed | Jobless | unemployment

Roubini: Jobless Rate Will Jump to Near 10 Percent as Economy Slows

Thursday, 12 May 2011 01:59 PM

Expect unemployment to return to nearly 10 percent within a year and for the economy to hit the brakes, slowing to 2 percent, says NYU economist Nouriel Roubini.

The U.S. economy faltered to 1.8 percent growth in the first quarter, although some Federal Reserve members still expect growth on the order of 3 percent or higher in 2011.

“Things are going to be much more difficult than they’ve been so far,” Roubini said at a panel debate on alternative investments taking place in Las Vegas, reported CNBC. The error being made is not taking into account the seriousness of the Europe’s debt problems, Roubini said.

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Nouriel Roubini
(Getty Images photo)
The specter of even higher unemployment is running up against a budget reality that has some in the Republican-led House and a bevy of state governors angling to slash jobless benefits.

A bill that just passed in the Ways and Means Committee, for instance, would let states put $31 billion sent from the feds for benefits to use instead to avoid tax hikes, pay back federal loans states took out during the initial months of the crisis, or to fund job programs, reports Bloomberg News.

Meanwhile, the Fed is looking ahead, sort of.

Minneapolis Federal Reserve Bank President Narayana Kocherlakota put a number on a potential hike in the benchmark interest rate during 2011, predicated on the notion that the economy does in fact put on better than 3 percent growth and that core inflation (excluding food and energy) rises to at least 1.5 percent. He suggested 50 basis points.

"Of course, a core inflation rate of 1.5 percent is still markedly below the Fed's price stability objective of 2 percent," Kocherlakota said in a speech, reported by Market News International.

"Accordingly, an increase of 50 basis points in the fed funds rate would still leave the Fed in a highly accommodative stance."

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Expect unemployment to return to nearly 10 percent within a year and for the economy to hit the brakes, slowing to 2 percent, says NYU economist Nouriel Roubini. The U.S. economy faltered to 1.8 percent growth in the first quarter, although some Federal Reserve members...
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