Why the ‘Fiscal Cliff’ Holds the Key to US Jobs Creation

The U.S. jobs market is in focus with monthly payrolls data out later Friday and the one thing that could provide a big boost to job creation - that has stayed weak in recent months - is a signal that the “fiscal cliff” will be avoided, economists told CNBC.
The “fiscal cliff” refers to the combination of tax cuts and spending hikes that are due to kick in at the start of 2013 unless Congress takes action. Most economists agree the impending fiscal tightening would result in a recession.

Concerns over this fiscal precipice have delayed investment and hiring decisions by companies, therefore any indication that the issue will be dealt with swiftly should bode well for the jobs market, said experts.

Mike Dueker, chief economist at Russell investments, said there is reason to be optimistic, with financial markets no longer as concerned about the impending fiscal tightening as they were a few months ago.

“The most important thing about the employment outlook is that when you look at the financial market warning signs about concerns over the “fiscal cliff,” these signs have got better over the past month – corporate bond spreads have narrowed, the LIBOR-Fed (Federal Reserve) Funds rate spreads have narrowed,” Dueker told CNBC Asia’s "Squawk Box."

“If we get some positive resolution to the ‘fiscal cliff’ with some reasonable compromise, we could see some strong economic growth going into 2013 and we could get some (payrolls) numbers in the region of up to 200,000 next year,” he added. 

Read more: http://www.cnbc.com/id/49652854