June 9 (Bloomberg) -- Nobel Prize-winning economist Paul Krugman said damage from the U.S. recession may persist “for a very long time,” with no clear engine for renewed growth.

“I’m really quite scared that we could muddle along,” Krugman said in a lecture today at the London School of Economics and Political Science. “I really do see the possibility of a global version of the Japanese ‘lost decade’ without the prospect of an export-led recovery. This could be unpleasant for a very long time.”

U.S. stocks erased a decline yesterday after Krugman said the economy will probably emerge from the recession by September. Recent reports showing smaller declines in housing and manufacturing and fewer job losses have reinforced forecasts that the slump may end this year.

“The ‘oh-my-God-the-world-is-ending’” phase of the economic downturn is over, and financial markets are “stabilizing,” Krugman said today. Still, “the employment situation is continuing to look bad and will probably get worse,” he said.

Krugman said he has “no idea” what will power the U.S. out of recession. The U.S. fiscal stimulus package, while not “trivial,” isn’t large enough to fuel sustained growth. Also, with the global economy in the doldrums, the U.S. can’t rely on a revival from a surge in exports, he said.

Even the end of a recession “doesn’t mean the same thing as it did in the old days,” said Krugman, a Princeton University economist. Unemployment may remain high longer than after the end of prior economic contractions, he said.

The National Bureau of Economic Research, based in Cambridge, Massachusetts, is the official arbiter of U.S. recessions and expansions. Robert Hall, the head of the NBER’s business-cycle-dating committee, said last week that it’s “way too early” to say the contraction is over.

To contact the reporters on this story: Shobhana Chandra in Washington at Schandra1@bloomberg.net

Last Updated: June 9, 2009 15:53 EDT