The United States is not facing a double-dip recession, and with inflation low conditions are setting up for equities in general to do well, Goldman Sachs' senior U.S. investment strategist Abby Joseph Cohen said on Wednesday.

An S&P 500 index level of 1,250 to 1,300 points <.SPX> is fair value and achievable over the next six to 12 months, Cohen said at the Reuters Investment Outlook Summit in New York.

The S&P 500 was trading on Wednesday at 1,075 points, up 1.3 percent.

Cohen, president of Goldman's Global Markets Institute, said the biggest worry shadowing the U.S. economy as it moves past the deep recession that started in late 2007 is the slow pace of job creation.

Concern No. 1 -- and it far outstrips everything else -- is the labor market. We all know that job creation has resumed, but it has resumed at a very slow pace, she said.

The comments by Cohen, who began her career as an economist with the Federal Reserve Board, echoed those made Wednesday by Fed Chairman Ben Bernanke.

The U.S. recovery is on a solid footing but it could be years before the jobs lost during the deep recession of 2008-2009 are restored, Bernanke said in testimony to the House Budget Committee.

Still, Cohen said that the weak May payrolls report, which was released on Friday, triggering a sell-off in the U.S. stock market, should be viewed as noise.

Monthly data are often misleading. You need to look at the figures on a two-to-three-month rolling basis, on which basis there has been a modest increase in hiring, she said.

Goldman Sachs currently estimates U.S. GDP growth for 2010 at 2.9 percent following the 2.4-percent contraction in 2009. But after 3.0 percent growth in the first and second quarters, growth in the third and fourth quarters of 2010 will moderate to just 1.5 percent.

Cohen said that with inflation and unit labor costs under control and more modest growth ahead, the Federal Reserve will wait as long as possible before raising interest rates.

Data from the Fed, showing that standards for commercial and industrial loans are no longer tightening, was among the positive elements at work in the U.S. economy, Cohen said.

We are, we think, from a commercial standpoint, past the worst in terms of the availability of credit, she said.

Goldman also forecasts corporate spending on technology as a source of strength for the economy.

Many individual investors in the United States have been rattled by stock market volatility in recent years, from the slide that savaged retirement accounts in 2008 to the startling and still unexplained flash crash on May 6.

But Cohen said the defensive response -- to stay out of the stock market altogether -- was a worry.

It makes me somewhat concerned that individuals are flocking to bond funds, she said. Those investments may not hold up for them long term if inflation starts to rise.

For now, though, U.S. inflation is low -- forecast by Goldman at 1.7 percent for 2010 and 0.6 percent for 2011 -- which is supportive of higher stock price/earnings multiples, Cohen said.

The S&P 500 is trading at about 14 to 14.5 times this year's expected 2010 earnings per share. With inflation under control you might expect an 18 P/E ratio, Cohen said.

EUROPE GROWTH A WORRY

Turning to Europe, Cohen said that the euro, which on Tuesday traded at its lowest point since 2006, is about where it should be for now given the sovereign debt crisis shadowing parts of the Continent.

Clearly there are worries about European growth, she said, adding that countries such as Spain are moving on the right path toward restoring fiscal balance, but without being too extreme.

The eurozone faces its toughest test to date from the rolling sovereign debt crisis, but there is sufficient political determination to ensure it survives, Cohen said.

Germany, whose exports are skewed to the type of industrial equipment now seeing rising demand, stands to benefit from the weak euro, she said.

(Editing by Padraic Cassidy)

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