Markets Doubt More Fed Easing Will Boost Hiring: Survey

Market participants also expect the Fed to extended the period during which it forecasts its benchmark lending rate will remain exceptionally low. Only a quarter of respondents think the guidance will continue to peg late 2014; 67 percent believe it will be extended into 2015 and 5 percent think it could be lengthened out to 2016.

While there has been much talk among Fed officials about ending the calendar date guidance and replacing it with economic targets to trigger monetary policy, just 32 percent of market participants favor such a move. If the Fed were to move to economic targets, 55 percent support inflation, 40 percent nominal GDP and 36 percent unemployment.

Amid the considerable skepticism about Fed policy, recent pledges by the ECB to purchase the bonds of troubled nations under certain circumstances look to have calmed market nerves somewhat.

One quarter of respondents think the euro zone has a chance of remaining intact five years now, up from just 11 percent in the July survey. The chance that some countries will be ejected or leave fell to 72 percent from 82 percent. And the probability of default on government bonds dropped for all the troubled countries in Europe.

For example, in March survey respondents put the probability of default by Portugal at 53 percent. It dropped to 34 percent in the September survey. Still, all the measures of European anxiety remain high and have mostly bounced off the most pessimistic levels. (Read More: Will New ECU Program Work?)

"The Draghi Band-Aid leaves the fiscal cliff as the single biggest near-term economic risk," wrote Robert Brusque of Fact and Opinion Economics. "But the longer term risk from Europe is still very significant as the Draghi plan fixes nothing and papers over the structural cracks in EMU."

For the second month in a row, the fiscal cliff is seen as the biggest threat facing the US economy, chosen 39 percent of respondents and almost unchanged from the July survey. The threat of the European crisis was chosen by just 24 percent, down from 30 percent in the prior survey.

The threat posed by slow job growth was chosen by 15 percent of market participants, up 8 points from July and now in third place ahead of tax and regulatory policies. (Read More: Election, 'Fiscal Cliff' Temper US Hiring Outlook.)

Three quarters of respondents say the threat of the fiscal cliff is hurting the US economy right now. "The U.S. and global economy are entering the most dangerous period of this economic recovery," wrote Ethan Harris, boa Merrill Lynch Global Research. "If the fiscal cliff is badly handled at the same time that the European crisis enters another acute phase, a recession is likely."

The probability of recession in the next 12 months was unchanged at 26 percent, but the group still sees slow growth in the US. Year-over-year GAP is seen coming in at 2.06 percent for 2012, just a bit higher than July and 2013 growth is seen at 2.21 percent.

Not much is expected from the stock market: the S&P is seen rising just around 1.25 percent by year end and 4.3 percent by mid next year. Interest rates are expected to remain low, around 2 percent for the 10-year note by June 2013.

-By CNBC's Steve Liesman
@steveliesman