US likely to dodge recession though slowdown continues

WASHINGTON: The US economy looks set to deliver a repeat performance in 2012: for the third straight year, it may suffer a swoon yet not slip into a recession.

"I don't think the slowdown will be any more consequential than the past two years," said John Ryding, a former Federal Reserve researcher who is chief economist at RDQ Economics LLC in New York. "There are positives out there in the economy. We'll avoid a recession."

Household balance sheets are in better shape, with indebtedness down about $100 billion in the first quarter, according to the New York Fed. Banks are more profitable: earnings have risen for 11 straight quarters, based on data compiled by the Federal Deposit Insurance Corp.

Even the housing market is reviving, with starts through the first four months of this year 24% higher than the comparable 2011 period.

Stocks plunged on Friday on news that American employers last month added the fewest workers to their payrolls in a year while the jobless rate rose.

Treasuries gained, sending yields to record lows, as investors sought refuge from rising financial strains in Europe and slowing growth in the US and China. German and UK yields fell to all-time lows after Spanish Economy Minister Luis de Guindos said the future of the euro is at stake.

Following the jobs report, Michael Feroli, chief US economist at JPMorgan Chase & Co. in New York, lowered his forecast for third-quarter economic growth to 2% from 3%. He sees the economy expanding 2.5% this quarter. Allen Sinai, chief executive officer of Decision Economics in New York, bumped up his odds of a recession next year to 15% from 10%.

Sinai said the US is in "better shape" to weather the global economic tremors than it was in the past, and in comparison with other countries today, provided the euro region's currency compact doesn't collapse completely.

He sees US growth picking up to 2.5 to 3% in the second half of this year as consumer spending expands, encouraging employers to take on more workers.