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Economic Forecasts

Recession? No Way

Growth is slowing, but that's not really such a bad thing.

Rising interest rates, stop-and-go stock prices and Price Reduced signs on lawns could have you thinking darkly about the economy. Don't, says Standard Poor's chief economist David Wyss.

Instead, he says, look at it this way for the rest of the year: "You'll still have your job, and even if your wealth doesn't grow as fast as you'd like, you and most of us will still be doing fairly well." There's no recession in sight and no burst of unemployment to fear -- unless you're in the home-building business, which is suffering from higher mortgage rates and fading interest from investors and speculators.

But exports are strong, and manufacturing, commercial construction and finance are doing fine, so Wyss and other seers expect the U.S. economy to merely downshift, not stall. Look for a 2.5% to 3% growth rate in the second half of 2006, down from more than 3% for the first half. A 2.5% pace would be similar to that of 2002, when Americans were relieved to see the nation pull out of recession before it got too deep.

A slower growth rate isn't just a bunch of numbers. The trend will prompt the Federal Reserve to finally stop raising interest rates. Seven months typically elapse between when the Fed quits tightening and when it next cuts rates -- a development the stock market is eager to see. If this becomes the script, 2007 will be decent for jobs, calmer for real estate and better than 2006 for stocks.