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US may need a second stimulus
Tue, Jul 07, 2009
AFP

THE UNITED States may need a second stimulus package focusing on infrastructure projects to put the world's biggest economy firmly on the path to recovery, a top White House adviser said here Tuesday.

Laura Tyson, a member of US President Barack Obama's Economic Advisory Panel, said the first stimulus package included 'a significant amount of investment in long-term growth.'

She also said the country's budget deficit - already at its widest since World War II - will likely be bigger than expected this year and could surpass an earlier projection of around 12 percent of gross domestic product.

Her comments come after Obama last month said US unemployment would likely climb above 10 per cent but that a new injection of government money was 'not yet' needed.

However, she said her remarks represent her own views and not the administration's official position.

Tyson, speaking at the Nomura Asia Equity Forum in Singapore, said it was too early to quantify the size of a second package, adding that 'we'll have a much better idea towards the end of the year.'

The current stimulus package of US$787 billion should create or sustain 3.5 million jobs as planned, she said.

But a second deal, with an emphasis on building projects, may be needed to put the US economy on the right track, she added.

However, its effect on unemployment will be less than previously expected because the crisis has had a greater impact on job losses than anticipated, she told the forum.

Signs of recovery for the recession-hit US economy are more likely to be evident in the third and fourth quarter, as opposed to second quarter, she added.

'The question is whether the US economy has reached a level of stabilisation yet, but the recent unemployment numbers tell me it hasn't,' Tyson said.

'The rate of decline has slowed, and there is an uptick in some indicators, but that's a very different argument than a recovery.

'Businesses are likely to rehire employees at a slower pace than in the previous two recessions, so unemployment is going to be a lagging indicator.'

 

 
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