Crisis in Europe Could Affect US Growth

What's Next?
What's Next?

A serious debate is underway among economists over the effects of the turmoil in Europe.

Some economists are sticking to their guns and seeing little effect, while others are shaving as much as half a percentage point off growth in the second half of this year.

The outlook from six economists surveyed by CNBC is an average of growth at 3 percent over the next year, including a slight bump this quarter, and then a dip to 2.9 percent over the subsequent two quarters.

However, some of those economists see a growth rate of as low as 2 percent, while others expect a high of 4 percent.

The debate about the nation's projected near-term expansion also pits the big guns on Wall Street against each other.

For instance, Goldman Sachs , which has been bearish, became worried about its forecasts as fiscal data came in better than expected. Now, the bank, which predicts that real GDP growth will slow to about 1.5 percent, sees a better chance that its forecasts will come true.

Economists at Nomura Securities , trying to quantify what the European impact will be, are estimating the continent’s debt problems could mean half a percentage point less growth in the third and fourth quarters of 2010.

JP Morgan said in a report that the bank had not “materially altered our global outlook. Markets are pricing in event risks of a European sovereign-debt default or broadening bank crisis that are unlikely to be realized.”

Contributing to the these fiscal predictions are the recent stock market downturn and signs of tighter financial conditions, as well as lower interest rates and oil prices, which partly offset the negative factors.

As for job creation in May, economists' predictions range between 200,000 and 700,000. According to a Reuters survey, economists are looking for 513,000 jobs to have been created in May, of which 190,000 are in the private-sector.

The Labor Department will issue its May jobs report on Friday.