US economy may shrink again in 2010, P. Krugman says

Nobel Prize winning economist Paul Krugman said in ABC broadcast he thinks there’s a “reasonably high chance” the economy will contract in the second half of next year.

Krugman said he agreed with the assessment of fellow Nobel-winning economist Joseph Stiglitz that there is a significant chance the economy will shrink in 2010.

“I would go with Joseph Stiglitz,” Krugman added, “I’m really worried about the second half.”

“The likelihood of this slowdown is very, very high,” Stiglitz said a week ago. “There is a significant chance that the number will be in the negative range.”

Stiglitz, a professor at Columbia University, called on Washington to make more funds available to states that face a drop in tax revenue. The United States must grow at least 3 percent to create enough jobs for new entrants into the labor force.

The unemployment rate fell to 10 percent in November from 10.2 percent in October.

“If you don’t prepare now, and the economy turns out to be as weak as I think it’s likely to be, then you’ll be in a very difficult position,” he said.

The worst US recession since the Great Depression has drained more than 7 million jobs in the past two years.

The economy grew at a 2.8 percent rate in July through September, after a record four straight quarters of contraction.