Fixed income investment professionals are worried about the prospects for the U.S. economy and are becoming very concerned the continuing stagnation in the jobs market.

That’s the finding of the latest semi-annual survey of 88 fixed-income investment professionals announced by Fitch Research, an arm of Fitch Ratings, one of the three big global ratings agencies.

The survey found what it called a “meaningful fall” in investor confidence in the fixed income field over the course of the first six months of 2011, with only 2% of those surveyed saying they expected U.S. GDP growth of 3% or higher for the year, compared to 43% who expected that pace back in January.

Expectations for GDP growth in the Euro Zone also fell, with a majority of those surveyed saying they thought European growth for the year would come in below 1%, and with 70% saying it would be under 2%.

The only note of optimism was about Emerging Markets, which 78% of survey respondents said they expected to grow at above 3% this year, but even that was down from 88% who expected that pace of GDP growth when surveyed last in January.

The stumbling U.S. jobs market “weighs heavily” on fixed income investment professionals, survey author Mariarosa Verde wrote.  She said 59% of those responding to the survey said that the stalled jobs market was much more critical to a recovery in the economy than US home prices or Euro Zone stability. Inflation was also not a concern over this year and next.

And at this point the outlook for jobs among these investment professions is gloomy, with a majority saying they expect unemployment to remain stuck at 8-9% for both 2011 and 2012, and an increasing number saying that the official rate of unemployment could even rise to 9-10 % by the end of 2012.One area of improvement in the survey was the outlook on municipal debt, with 41% of the respondents saying they expected conditions for municipalities to improve, a significant jump from only 31% who expressed that kind of optimism last January.

The professionals surveyed were primarily senior managers of asset management firms and insurance companies having between $20 and $200 billion in assets under management.



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