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The nation is out of it's technical recession, but has never came out of it's functional recession.
The increasing and energy prices are a part of the recovery
The nation is out of it's technical recession, but has never came out of it's functional recession.
The increasing and energy prices are a part of the recovery
Just because the governmensaid so....right
To be sure, economists still place long odds on that worst case scenario. But the odds are a lot less long than they were just a little while ago. And the trend of a weakening economy is clear: most of the economists surveyed, even those who are not worried about a recession, have cut their forecasts for growth in the second quarter sometime during the last month. Many are trimming estimates for the full year as well.
A CNNMoney economic survey of 18 leading experts found they think there is about a 15% chance of a new recession. That's about double the chance they believed existed at the start of the year. "The fragile U.S. recovery means the economy is much more vulnerable to geopolitical shocks and a rise in fuel prices," said Bernard Baumohl of the Economic Outlook Group, a Princeton, N.J., research firm. "Since the instability in Middle East is far from over, there are real risks for the U.S. and international economy."
The gloomier outlook of recession in the economic survey comes as most readings create a drumbeat of bad news, showing hiring grinding to a near halt, home prices continuing to slide to a new post-boom low, and a slowing of consumer and business spending. High prices for gas and food have taken a bite out of consumer confidence and there are worries among economists about the threat of other external shocks, such as a possible debt default by the Greek government, that would ripple through the world's financial system. Still, Baumohl said he thinks there is a "less than 20%" chance of a new recession. But he said at the start of the year there was no chance.
Many other economists said the weakening of the economy in recent months in the first half of the year has changed their outlook. "We came off a great Christmas and some nice jobs reports," said Gary Rosenberger of EconoPlay. "Then came storms and tsunamis and tornadoes. Who would have guessed that the economic recovery would hinge on the shifting of tectonic plates and global climate change?" But three of the economists surveyed say they still aren't worried about another recession, putting the chances between 0% and 5%.
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Economists have been ringing alarm bells after disappointing readings on some key economic indicators, including those measuring consumer spending, manufacturing, job cuts and gross domestic product. And this Friday's closely-watched jobs report isn't likely to be much better. Economists surveyed by CNNMoney forecast a gain of only 75,000, with unemployment expected to remain at 9.2%. Investors are increasingly worried about the state of the economy, sending stocks into a slide. The Dow Jones industrial average opened lower again Wednesday, the day after the blue chip index tumbled 266 points, while the S&P 500 slipped into negative territory for the year.
Martin Feldstein and Larry Summers, two leading economists from opposite political camps, both made comments Wednesday suggesting a significant threat of a new recession. Feldstein, a top economic adviser to both President Ronald Reagan and President George W. Bush during the 2000 election, told Bloomberg that he believes the country now faces a 50% chance of a new recession. "This economy is really balanced on the edge," he said. "Nothing has given us much growth. The economy has been flat to down since the beginning of the year."
Feldstein's current outlook is similar to his view in January 2008, when he was one of the first economists to declare the start of the recession that would last more than two years. Feldstein is also a former president of the National Bureau of Economic Research, and he serves on the committee of that group, which makes the official determination for when recessions begin and end. He said housing continues to be a major drag on the economy and that all the policy responses so far have been a failure.
Summers, who was Treasury Secretary under President Clinton and the first director of the National Economic Council under President Obama, wrote an opinion article for Reuters arguing that the economy is already at "stall speed." Summers said that without a policy response to the current economic weakness, there is a one-in-three chance of a new recession. "The United States's current problem is much more a jobs and growth deficit than an excessive budget deficit," he said. He argued that extending the current payroll tax holiday due to expire at the end of this year, as well as an extension of unemployment benefits and more spending on maintaining infrastructure, are all needed to spur greater economic demand.
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Treasury prices have spiked -- then spiked some more, pushing the 10-year Treasury yield down to a nine-month low of 2.57% Tuesday. To put that move in perspective, 10-year yields had been above 3% just last week. A drop of that magnitude is rarely seen, but major debt news and a series of dour economic reports have sparked a flight to the safety of U.S. bonds. "Europe is in crisis," said Kim Rupert, a fixed income analyst at Action Economics. "The fiscal and debt situation is getting worse by the minute."
Really, the eurozone worries are nothing new. But they never seem to end -- and could be getting worse. Greece is the star of the show, while the cast of supporting characters continues to grow. Italy is the latest sovereign to be knocked by contagion fears. On Wednesday, Italy's economy minister met with the eurozone chief to tackle concerns about the country's debt. They both called the meeting "fruitful," according to Italian news agency ANSA. Italy is the largest economy yet to be dragged into the danger zone. And that has unnerved investors, who are responding by gobbling up Treasuries.
The other problem? A batch of economic data that indicates economic growth is slowing, both in the U.S. and abroad. Just Wednesday, manufacturing data and durable goods orders disappointed, following a lackluster GDP report from the government late last week. Markets are clearly nervous. On Tuesday, the Dow registered its 8th consecutive daily decline -- a losing streak not seen since October 2008. With the Dow off 1% on Wednesday, stocks were poised to continue that losing streak.
While equity markets have declined, Treasuries have spiked. But Rupert said an extra factor is moving yields lower: The end of the debt ceiling debate. U.S. debt is usually thought of as one of the safest investments around. But during the debt ceiling fight, fearful investors avoided Treasuries. Now that the risk of default has lifted, investors are flocking back to the safe-haven asset, and putting further pressure on yields, Rupert said.
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Recession risks increase as economy slows...
Cue the collective sigh of relief! A government report showed the job market fared better than expected in July. After rising for three straight months, the unemployment rate fell to 9.1% in July, beating economists' forecasts. Could our fears of a double-dip recession possibly be over? Not so fast. "July's employment report will go some way to reducing fears that the economy is slipping into another recession," Paul Dales, senior U.S. economist with Capital Economics, acknowledged in a note to clients. But he was quick to follow it up with these words of caution.
"But it highlights that the labor market has hardly recovered at all from the recession and that the economy is not growing fast enough to reduce significantly the unemployment rate," he said. Economists often say the economy needs consistent growth of 150,000 jobs each month, before the unemployment rate comes down. In the case of this July, only 117,000 jobs were created. The unemployment rate did come down -- to 9.1% from 9.2% -- but it was due to other not-so-encouraging reasons.
Rather -- points out economist Nouriel Roubini via Twitter -- it was because nearly 200,000 people were no longer counted in the unemployment calculation. They left the labor force -- either to retire, go to school or just because they gave up on their job search altogether. Known for predicting the 2008 financial crisis, Roubini also told Bloomberg TV Friday morning, that he still puts high odds on a double dip even after the jobs report came in better than expected. "I think it's a pretty lousy report," Roubini said. "We're at a stall speed and probably there's more than 50% probability of a recession in the next 12 months."
Evidence has been mounting for over a month now, showing the recovery has hit a speedbump and is slowing. Last week, the government revised down its GDP numbers, showing the economy grew a measly 0.4% in the first quarter and only 1.3% in the second. Consumer spending has barely picked up and the manufacturing sector practically stood still in July. Add to the mix, steep government spending cutbacks, and the unlikelihood of any substantial help from the Federal Reserve, and the experts are wary of where the U.S. is headed.
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While there was no one trigger for the market plunge, a spate of gloomy numbers and the return of panic selling reawakened fears of another recession. Bleak numbers for U.S. jobs, housing and manufacturing compounded the anxiety over European woes, rattling share prices in every industry, and indicated again that the economic recovery remains fragile.
All three major stock indexes more than wiped out their gains from earlier this week. For the year, the Dow Jones industrial average is down 5 percent, the Standard & Poors 500-stock index is down 9 percent and the Nasdaq composite index is down 10 percent.
The sell-off continued in Asian markets Friday. Japans blue-chip Nikkei 225 index ended its morning session down 2.15 percent, and stocks dropped sharply in Seoul, Sydney and Hong Kong. I think the risk now is that we fall into another recession, said Patrick Newport, an economist at IHS Global Insight in Lexington, Mass. I think the risks have just changed very dramatically in the last couple of months. People are spooked.
Data from the National Association of Realtors, a trade group, painted a disappointing picture of the housing market, with sales of existing homes falling 3.5 percent in July to 4.67 million, the lowest rate in eight months. Economists had been expecting sales closer to 5 million. Just as mortgage rates are dropping, people are not applying to buy homes, Newport said.
Jobless claims rise
About a quarter of all Americans have been in a continuous recession for the last 30 or 40 years.
Another quarter of the popiulation have been in and out of recessions repeatedly in the last 40 years.
We do NOT have one economy, folks.
We have many economies depending on your socio-economic circumstance.
