Roubini: If Jobs Number Is Weak, QE3 on Its Way
Staff Writer, CNBC.com
Nouriel Roubini, the economist known for his gloomy predictions, told CNBC Friday that he is still pessimistic on the outlook for the U.S. — and that he expects a further round of quantitative easing from the Federal Reserve in December.
“If today’s jobs number is ok then the Fed can wait to do QE3,” Roubini told CNBC at the Ambrosetti Forum in Lake Como, Italy.
“Yet the economy is weak enough and the unemployment rate weak enough that the Fed is going to do QE3 eventually.”
On Thursday night, President Barack Obama asked for more time to help solve the U.S.’s economic problems as he accepted the Democratic Party’s nomination to seek a second term as President. He maintained that the problems of slowing growth are solvable. (Read More: President Obama's Speech)
Friday’s jobs report is being watched closely as one of several key economic indicators which could sway U.S. voters — and the Fed when it decides whether or not to inject more liquidity into the markets. (Read More: August Jobs as Election Indicator)
“By the fourth quarter, with the fiscal cliff coming and firms becoming more cautious, capital spending is slowing down and growth will be not even 2 percent,” Roubini, founder of Roubini Global Economics, warned.
“Job creation might be around 100,000 or slightly higher for the next few months, but there’s not going to be any significant reduction in the unemployment rate.”
He argued that with gross domestic product (GDP) growth of around 1 percent to 2 percent, the fiscal drag may weigh down the economy.
Roubini predicted growth of close to 2 percent for the third quarter, but believes that it will then slow in the last three months of 2012.
“If you get the fiscal drag as growth slows, you’re close to zero growth next year, he said.
“This implies that by December the Fed is going to do a third round of QE3.”
He was dismissive of the European Central Bank’s much-anticipated announcement of a bond-buying program Thursday, dubbing it a “time-buyer” which won’t halt the “balkanization” of the banking system and public debt markets in the euro zone.
Written by Catherine Boyle, CNBC. Twitter: @catboyle01