Europe Economy

Unemployment to Rise Through Most of 2010: Roubini

High unemployment and a lack of stimulus for private demand by countries like Japan and Germany could slow down the world recovery, famous bear Nouriel Roubini, chairman of RGE Monitor, told CNBC Monday.

"I see the unemployment rate rising through most of 2010," Roubini told CNBC.

"Not just is going to go above 10 percent but the risk is it's going to stay above this level and return to more normal only more gradually and that's going to be one of the important sources of weakness for an economic recovery," he added.

Nonfarms payrolls in the US rose more than expected in September, while the unemployment rate was 9.8 percent, the Labor Department reported Friday.

Nouriel Roubini

Data released Monday showed signs that a recovery was under way, with Britain's service sector expanding at its fastest pace for two years in September, and companies being more optimistic about the next 12 months than at any time since April 2007.

In the euro zone, the services economy returned to growth for the first time in 16 months in September at a slightly better rate than first expected, but job losses increased, data showed.

But countries that overspent before the crisis and are now deep in debt, such as the US and the UK, will cut their spending to help deleverage, he said.

Countries such as Japan and Germany, with a trade balance surplus, should stimulate their internal demand to compensate for the loss, but this is not likely to happen, Roubini added.

"Globally we have a glut of capacity and the recovery of global aggregate demand is going to be weaker than otherwise and that's one of the reasons why I believe the global recovery is going to be weaker than a V-shaped recovery," he said.