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Expect 'Very Strong' 3-5% Growth by Year-End: Economist


The Dow crossed the 9,900 mark on Monday and investors are wondering what the shape of the recovery will look like—will it be a V or a W? Wayne Angell, principal at Angell Economics and former Federal Reserve governor, and Brian Bethune, U.S. economist at IHS Global Insight, shared their market insights.

Recovery: V or W-Shaped?

“It’s a V and very strong growth,” Angell told CNBC. “The growth is going to be a minimum of 3 percent and a maximum of 5 percent" between the third and fourth quarters.

“Monetary policy is extremely accommodative and that means we have accelerating inflation of commodity prices and that goes on down the production curve, and that means that corporate profits are going to be enormous,” he added.

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Angell said the 5 percent ceiling is a result of employment growth that will be “practically non-existent.”

In the meantime, Bethune expects a “soft W-shape” recovery due to fiscal stimulus programs that will eventually lose steam.

“We’re going to get a strong growth in the third quarter of 3.6 percent but then as we get into the fourth quarter, down to 2.5 and for the first half of 2010, sub 2 percent before we pick up again,” he said.

Bethune said the constrained small-business sector is a large reason for the high unemployment rate.

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“It’s a sector that’s being hemmed in and if we can’t revitalize the small business sector, then we’re not going to get the job growth,” he said. “So it’s a sector that does need some attention in terms of dealing with the current situation and trying to incentivize small business to be more dynamic, to invest and hire new people.”

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No immediate information was available for Angell or Bethune.