The US has in all likelihood dodged a recession for now, even though it

RELATED ARTICLES Tapi pipeline perfect example of energy diversification: US India to move WTO this week against US visa fee hike Dr Reddy's launches lansoprazole capsules in US market Nasscom concerned over US visa probe on Indian firms Rajat Gupta to face US jury in insider trading case

would be too early to sound all-clear for the economy.

A string of stronger-than-projected numbers — capped by the news on October 7 of a 103,000 rise in payrolls last month — has prompted economists at Goldman Sachs group and macroeconomic advisers LLC to raise their growth forecasts for third quarter growth to 2.5 per cent from about 2 per cent. That’s nearly double the second quarter’s 1.3 per cent rate and would be fastest growth in a year.

“The US economy doesn’t look like it’s double-dipping at all,” said Allen Sinai, president of Decision Economics in New York. “But it is a crummy recovery.”

That recovery still faces what economist Chris Rupkey in New York calls “a lot of headwinds”. These range from the sovereign-debt crisis in the euro zone — and increasing likelihood of a recession there — to political gridlock in the US over the budget.

“We can skirt a recession,” said Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ. “But if headlines worsen in Europe and cause a major stock-market rout, it could lead to a loss of confidence on part of businesses and consumers and make forecasts for recession a reality.”

European stocks and the euro rose after German and French leaders pledged to devise a plan to stem the debt crisis in three weeks. US stock futures also gained.

The unsettled outlook may push US Treasury bond yields back down as investors seek safety in the debt of the world’s largest economy. The yield on the 30-year bond remains on course to fall to about 2.5 per cent, according to Christopher Hine, vice-president of technical analysis at Credit Suisse Securities in London. “The bull trend is still there,” he said in an October 7 conference call with clients.

The long bond ended trading at 3.01 per cent in New York on October 7, after touching 2.69 per cent October 4, lowest since January 2009. Yields rose as concerns about a recession ebbed.

The Standard & Poor’s 500 Index will face difficulty trading above 1,200 in the next few weeks as investors seek to determine the impact of the European crisis on US corporate earnings, Sinai said. Business with Europe represents about 20 to 25 percent of operating profits for companies in the S&P, Sinai said.

S&P 500 futures added 1.4 per cent in London, while the Stoxx Europe 600 Index rose 0.6 per cent, extending a three-day, 6.7 per cent jump. The S&P 500 had climbed as much as 0.6 per cent on October 7 on the back of the jobs numbers before being erasing gains after Fitch Ratings downgraded the foreign and local currency long-term issuer default ratings for Spain and Italy.

The euro advanced 1.6 per cent against the dollar and strengthened 1.5 per cent versus yuan after German chancellor Angela Merkel said European leaders will do “everything necessary” to ensure that banks have enough capital. The latest numbers bring the jobs data in line with what other statistics suggest.