Jobs Will Give Boost as Stimulus Ends, Greenlaw Says: Tom Keene

July 6 (Bloomberg) -- Job growth will sustain the U.S. economic recovery even as government fiscal stimulus ends, according to David Greenlaw, Morgan Stanley’s chief fixed-income economist in New York.

About 200,000 jobs will be added to the U.S. economy each month during the second half of the year, increasing real disposable income and spending by about 3 percent, enough to generate a sustained recovery, Greenlaw said today during a radio interview with Tom Keene on Bloomberg Surveillance.

Growth is lower than expected because of “other headwinds” in the housing and credit markets, according to Greenlaw. Increases in hiring and industrial production indicate “modest pickups from depressed levels,” he said.

“A lot of people are tying a second-half slowdown in the U.S. to the removal of fiscal stimulus,” Greenlaw said. “I just don’t think that’s right.”

Morgan Stanley expects “moderate, sustainable growth, a rebound in private credit demands, a bottoming in inflation and a Fed that begins to implement its exit strategy,” analysts including Greenlaw said in a research note on July 2. The yield on 10-year Treasury note may rise to 3.5 percent by the end of the year, the strategists wrote. The firm is one of 18 primary dealers that trade directly with the Federal Reserve.

After-tax income, infrastructure spending and aid to state and local governments have supported the economic recovery, Greenlaw said in the interview.

Some analysts are too quick to conclude that the end of fiscal stimulus will be bad for the economy, said Erik Nielsen, chief European economist in London at the primary dealer Goldman Sachs Group Inc., in a separate Bloomberg Surveillance interview.

“The jury is still out,” Nielsen said. “Certainly in Europe, where we have very high private savings ratios, I don’t think one would want to add more stimulus to the story.”

The 10-year Treasury note yield dropped 0.03 percentage point to 2.94 percent today after touching 2.8793 percent on July 1, the lowest level since April 2009.

To contact the reporters on this story: Alex Kowalski in New York at; Tom Keene in New York at

To contact the editor responsible for this story: Dave Liedtka at