UPDATE: Another Economic Stimulus Could Come Next Year - BofA

Bank of America Merrill Lynch (BAC) analysts believe another economic stimulus package could come next year if more jobs are not created.

The comments were made Monday during a wide-ranging panel discussion entitled "Innovation, Policy and the Road to Recovery" that was sponsored by Merrill Lynch Global Wealth Management.

Given the lack of jobs in rural and urban settings around the country and the struggle that state capitals are having to balance their budgets, political pressure will rise at the beginning of next year for more stimulus, said Harold Ford Jr., vice chairman and senior policy advisor at Bank of America Merrill Lynch, "though they won't call it a second stimulus, they'll call it a creative name."

Concurring, Ethan Harris, Bank of America Merrill Lynch's head of North America economics, noted that incumbent Democrat legislators would not want to enter into mid-term elections in the fall next year without signs of job growth.

The panelists generally agreed that the government needed to spur investment in new technologies and innovation to drive growth and jobs, especially in the area of clean energy, while the focus should also shift to exports. They complained that issues such as the health care debate had sidetracked would should have been an effective engine for job creation.

"We just have to think about this country more as an exporter in the future," said Jeffrey Immelt, Chairman and CEO of General Electric (GE), who was also on the panel.

Noting that China was on target to add 250 gigawatts of electric power capacity over the next five years, compared with 30 to 45 gigawatts in the U.S., he said it was more likely to take the lead in terms of new energy technology. "Are they are going to lead in coal gasification. I think they are going to lead."

Immelt said that the group of countries covered by emerging Asia--defined as China, India and Southeast Asia--along with those that GE defines as "resource rich," including Brazil, Australia, the Middle East and some African countries, are poised to rise from a combined 25%-26% of his company's revenues in 2008 to between 40% and 50% by 2012.

The arrival of a new era for emerging market countries is "really real," Immelt said. "It is the combination of more consumers that are joining the middle class and getting more consumption power, mixed with more sophisticated governments ... mixed with education and a whole series of things."

But Michael Hartnett, Merrill Lynch Bank of America's Chief Global Equity Strategist, said next year would be a critical test of whether emerging market countries have truly come of age. The test, he said, would be whether they get overcome by the "hubris" of their success, noting that China will have to start appreciating its currency while others, such as Brazil, will have to show the political will to start hiking interest rates.

-By Jessica Papini, Dow Jones Newswires; 212-416-2172; jessica.papini@dowjones.com