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Unemployment May Hit 10.3% by March 2010: Economist

Stocks tumbled Thursday after disappointing ISM manufacturingand initial weekly jobless claimsreports. Is the economy taking a breather or should investors prepare for a possible second "dip" in the recession? John Lonski, chief economist at Moody’s Investors Service, shared his outlook with CNBC.

“The data was passable—it wasn’t necessarily bad for the economic outlook,” Lonski said.

“This is going to be an uninspiring, lackluster economic recovery. But there is nothing in the recent data that strongly suggests that the risks of a double-dip recession have increased measurably.”

Lonski expects the real GDP figures to grow by 3.7 percent in the third quarter and to slow in the fourth.

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“The unemployment rate is going to rise further,” he said. “It’s not going to peak until March of 2010, at 10.3 percent. Then it falls very slowly to the end of 2010, [but] the unemployment rate still may be above the 9 percent mark.”

On a more optimistic note, however, Lonski said he sees some good signs on the corporate credit front.

“We’ve had corporate bond yield spreads come in significantly and this may be a foreshadowing a much improved performance by corporate debt repayment in 2010, and, in turn, this may flow over to household debt repayment, but not right away,” he said.

“We’ll have to wait for these improvements to materialize.”

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No immediate information was available for Lonski or his firm.

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