The recovery will continue to be steady, but “sluggish and choppy” with a 1 ½ percent growth rate, and unemployment will be high, at between 9 and 10 percent, for the next 18 months, Jan Hatzius, chief US economist of Goldman Sachs, told CNBC Tuesday.
“The economy has been growing at a very steady 1 ½ percent growth pace since the middle of 2009,” said Hatzius. “And since the inventory cycle is now mostly behind us, we think that GDP growth is also going to come in at 1 ½ in the second half of the year.”
Hatzius said he expects some deterioration in job growth during the second half of this year and that high unemployment will continue through 2011. He is in favor of Washington pumping more stimulus programs into the economy to counter the high rate of joblessness, as policy makers are now considering.
The disappointing retailand jobs numbers of late are an indication of a pullback in the private sector.
“The private sector was running a large financial deficit, from the late 90s to the late 2000s, to 2007, that was basically the real economy counterpart of the asset price bubble that we saw at the time,” he added.
“Since 2007, you’ve gone from a 4 percent of GDPdeficit to a 7 percent surplus, which means that the private sector now is paying down debt and retrenching. I think it is going to run on for a while and weigh on the strength of the recovery.”
Hatzius added that he did not think the problems in Europe would impact growth in the US, as many have feared.