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Author`s name Alex Naumov

‘Skills gap’ prevents US economy from being strong and resilient

Today we can easily find a lot of gloomy forecasts about the future of the US economy. The Economist Intelligence Unit has recently published three such gloomy economic scenarios for the US economy.

Scenario 1. The Economist Intelligence Unit’s central forecast, to which we attach a probability of 60%, sees the impact being contained by timely monetary policy action, with only a modest effect on the global economy.

Scenario 2. Our main risk scenario, with a 30% probability, envisages the US falling into recession, with substantial fallout in the rest of the world.

Scenario 3. Should the US enter recession, another, darker scenario arises: that corrective action fails, and severe economic repercussions cascade from the US into the world economy with devastating effect. We attach only a 10% probability to this outcome, but the potential impact is so severe that it warrants careful consideration.

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The "fundamentals" of the U.S. economy are sound amid concerns that tighter credit and higher borrowing costs are threatening the housing market, a report by the Labor Department said.

The U.S. labor market has been "strong and resilient" as the national unemployment rate for the first half of 2007 ranged from 4.4 percent to 4.6 percent, said the study "America's Dynamic Workforce 2007," posted today. That's down from the 5.7 percent average unemployment rate of the 1990s.

"What our country does face is a 'skills gap’ said Labor Secretary Elaine "The majority of new jobs created over the next decade will require more skills, higher education and pay above average wages, so it is important to ensure that workers are able to get the education and training they need to access these growing opportunities."

President Bush announced Friday that he would let the Federal Housing Administration guarantee loans for delinquent borrowers, allowing them to refinance at more favorable rates. The housing market has been an engine of U.S. economic growth, Bloomberg News reports.

Source: agencies

Prepared by Alexander Timoshik