(Corrects name spelling in headline, second paragraph.)
Dec. 15 (Bloomberg) -- The failure of a major bank in Europe could set off a chain of events that pushes the U.S. into a recession, said Ellen Zentner, a senior economist at Nomura Securities International Inc. in New York.
“A Lehman-like event in Europe would cause a gross domestic product drop between 5 and 6 percent” on the continent, Zentner said in a radio interview on “Bloomberg on the Economy” with Sara Eisen and Michael McKee. “That is enough to push the U.S. into recession.”
European officials are struggling to contain a surge in bond yields that threatens the survival of the common currency. Christine Lagarde, the managing director of the International Monetary Fund, said today that the region’s debt crisis is escalating to the point that it will not be solved by one group of countries.
Turning to the U.S. economy, Zentner said an unexpected decline in first-time claims for jobless benefits reported today by the Labor Department may prompt economists to boost their forecasts for payrolls growth in December.
The number of applications for unemployment payments dropped by 19,000 to 366,000 in the week ended Dec. 10, less than the lowest forecast of economists surveyed by Bloomberg News and the least since May 2008. Other data showed manufacturing accelerated this month after pausing in November.
A failure by lawmakers to extend payroll-tax cuts would reduce U.S. gross domestic product next year, Zentner said. Growth can be “pared back by a full percent in terms of GDP,” she said. “It makes a big difference when the economy is only growing 2 percent,” the annual pace of expansion in the third quarter.
U.S. Senate leaders in both parties say they are optimistic that they can resolve the remaining differences over a payroll tax-cut extension and a broad $1 trillion spending bill funding most federal agencies, two issues that are stalling completion of congressional work for the year
Senate Majority Leader Harry Reid, a Nevada Democrat, said today his office and Senate Appropriations Committee Chairman Daniel Inouye, a Hawaii Democrat, are “pretty clear” about a handful of remaining issues in the spending measure. He said he and Senate Minority Leader Mitch McConnell are closer to agreement on areas of dispute in the payroll tax cut measure, and the congressional session could end “at a reasonable time in the next few days.”
--With assistance from Sara Eisen in New York and Laura Litvan in Washington. Editors: Christopher Wellisz, Vince Golle
To contact the reporters on this story: Meera Louis in Washington at firstname.lastname@example.org; Mike McKee at email@example.com
To contact the editor responsible for this story: Chris Wellisz at firstname.lastname@example.org