Hatzius: Economy “Fairly Bad” Or “Very Bad” Next 6-9 Months

October 7, 2010 at 8:02 am  ·  Category: Macro Economics, Market Commentary

We see two main scenarios for the economy over the next 6-9 months — a fairly bad one in which the economy grows at a 1½%-2 percent rate through the middle of next year and the unemployment rate rises moderately to 10 percent, and a very bad one in which the economy returns to an outright recession. There is not much probability of a significantly better outcome. The reason is that “short-cycle” factors such as the inventory cycle and the impulse from fiscal policy are likely to continue deteriorating through early 2011, keeping G.D.P. growth very sluggish.

Jan Hatzius, October 6

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