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Fed tapering, a move toward normalcy: MIT prof

Friday, 3 Jan 2014 | 8:42 AM ET
Back to 'business as usual' at the Fed: Expert
Friday, 3 Jan 2014 | 8:11 AM ET
CNBC's Steve Liesman,and James Poterba, NBER president, share their thoughts on the economy from the American Economic Association's annual meeting as markets look for hints of further tapering from the Fed. There's a real sense of optimism in some sectors, Poterba says, as real estate begins to "bubble back."

The U.S. economy is beginning to see traction, said James Poterba, president of the National Bureau of Economic Research, the group charged with determining turning points in the economy, such as when recessions begin and end.

"The U.S. economy, in particular, is healing," the MIT economics professor told CNBC on Friday. He said consumer spending, was strong in the latter half of 2013, and there's been improvement on the fiscal side.

"Our deficit numbers projected at this point are down," Poterba said on "Squawk Box" in an interview from the American Economic Association conference in Philadelphia, where Federal Reserve Chairman Ben Bernanke is scheduled to speak in the afternoon.

Poterba said he would characterize the Fed's $10 billion a month tapering as a move back to business as usual. "The very strong, favorable reaction to the Federal Reserve's announcement last month was partly a sign of relief that we're starting to move down that path," he said.

(Read more: Fed to taper bond buying by $10 billion a month)

Stocks shot higher following the Fed's announcement on Dec. 18, with the Dow Jones Industrial Average skyrocketing nearly 300 points. Both the Dow and S&P 500 closed at record highs that day. The indexes, of course, went on to close Tuesday at record highs for all of 2013 with the S&P 500 recording its best year in 16 and the Dow tallying its strongest in 18 years.

"There's going to be a lot of folks when they open their year-end emails from their retirement plans or from their brokerage accounts who are going to be pleasantly surprised at how much the market increase of 2013 has added to their balance sheets," Poterba said.

Stocks began the year Thursday on a down note, with the Dow and the S&P 500 losing nearly 1 percent each. That could be an omen for 2014, if the rest of the month continues the same way, because the axiom "as January goes, so goes the year" has been right about three quarters of the time.

But Poterba still sees the silver lining. "There's a real sense, I think, of optimism in some sectors," citing the budding real estate recovery as an example.

By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC.

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