Dive Off "Fiscal Cliff" Would Trigger Recession

The U.S. economy is poised to continue relatively restrained growth of 1.5% to 2.5% in 2013, adding about 100,000 net new jobs a month, provided the looming "fiscal cliff" is avoided, CME Group Chief Economist Blu Putnam wrote.

Among three scenarios for next year, a "muddle through, no long-term fiscal compromise" is most likely, at about 60% probability, Putnam said in a recent forecast. There's a 20% chance the U.S. will fall off the fiscal cliff and into recession, with Gross Domestic Product shrinking 2%.

There's also a 20% chance of an unexpected fiscal compromise between Congress and the White House that would set the stage for newfound economic confidence and stronger real GDP growth of 3% to 4%. "If the U.S. can get by the fiscal cliff, then economic growth has the potential to be quite robust," he said.

Still, GDP projections for 2013 are "unusually high-risk," Putnam said. "There are international risks coming from Europe, China, and the potential for geopolitical disruptions. On the home front, though, the risks are much more political than market-based and exceedingly hard to handicap."

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