Some of the pessimism surrounding the US economy may be overblown, according to Schroders chief economist Keith Wade.Mr Wade feels that the latest economic indicators suggest the US, by far Bermuda’s biggest trading partner, is still on the recovery track and not heading for a “double-dip” recession.However, he feels that recovery will be slow and predicts US economic growth will be about 2.4 percent next year.The debt crisis in the Eurozone will continue to weigh down on markets around the world however, until a solution can be found.“The data is less alarming than the talk,” said Mr Wade, who was in Bermuda last week for the Schroders Investment Conference. “It looks the US economy is lifting. The last payrolls report was better than expected.”Other reasons for hope included the rebound of the auto industry, which had rebounded quickly from the supply chain disruption caused by the Japan earthquake, and the drop-off in inflation. In addition, corporate profits continued to be generally healthy and corporate balance sheets strong.However, in trying to explain why the recovery was so much weaker than in most previous recessions, he said: “I think we can say that this time is different. Monetary policy is not working. People are just not responding to low interest rates.“It was a structural recession, in that so many people have lost their jobs in industries going through huge adjustments, like the construction industry. Housing starts are only about a quarter of what they were a few years ago, so you might say that we no longer need 75 percent of the construction workers there were then.”A major factor smothering the recovery was the collapse in housing prices that has left many US homeowners stuck in a negative equity trap, with the value of their home lower than the outstanding amount on their mortgages.US regulations were preventing those who were “underwater” from refinancing at today’s historically low mortgage rates of just over four percent.“Also the banks are saying they want down-payments of 25 percent and most first-time buyers simply don’t have that sort of money,” Mr Wade said.But he did expect to see some US growth, driven by corporate investment, particularly in IT infrastructure. The US dollar was quite competitive, which helped US exporters, he added.Unusually low price to earnings ratios make many equities appear cheap right now. Mr Wade suggested that investors should be looking for high-quality companies with a healthy dividend yield. Some equities were offering well-covered dividends in the region of five percent at a time when US 10-year Treasury bonds were yielding about two percent, he added.“The thing that holds everybody back is Europe,” Mr Wade said, speaking before yesterday’s summit of European leaders in Brussels. “People are saying that this is a political thing and it could go badly wrong.”The solution, he believes, lies in “the three Rs” restructuring of Greek debt, recapitalisation of European banks and reflation, through the lowering of interest rates by the European Central Bank.“It’s quite clear that restructuring of Greek debt is necessary,” Mr Wade said. “The debt to GDP ratio is about 160 percent and rising. The economy is too weak to grow and they’re still having huge problems collecting taxes.“To make a significant difference, the banks will have to agree to take bond losses of 50 or 60 percent. But clearly there are moral hazard issues.”