This month marks the second anniversary of an economic expansion that began at the end of what is now being called the Great Recession. But for millions of small businesses and households, the economic recovery has yet to arrive. Frank Goodnight, owner of Diversified Graphics, a Salisbury, N.C., printing company with 12 employees, is among them. In 37 years, he has survived some tough economic times. But never like this. "This recession is equal to the other four doubled,” he said. “Business has just been so bad for so long that right now we’re just hunkered down trying to survive.”
Consumer sentiment worsened more than expected in June on renewed concerns about the outlook for the economy, a survey released Friday showed . It was just the latest in a series of surveys that have pointed to a marked downward shift in the outlook for jobs, housing and the stock market. Economists say the lingering effects of the Great Recession help explain why so many businesses, investors and consumers remain so gloomy about the outlook for the U.S. economy. The mood appears to be worsening, leading to a concern among economists and others of a self-fulfilling prophecy -- that worried consumers will slow spending, further hampering the recovery, and perhaps raising the risk of a double-dip recession or at least yielding years of sluggish growth.
"Even though the US will probably escape another recession, the inability and reluctance of households to spend will result in a number of years of sub-par economic growth," said Paul Dales, senior U.S. economist at Capital Economics. “If you think things are going to get bad and you stop buying, things will get bad,” said Goodnight, the printing company owner. “And that’s where we are right now. Everyone is afraid of the deficits. They’re afraid of the new regulations that are coming down fairly soon. They’re afraid about health care. And no one’s going to make a major investment when there’s this much uncertainty in the air.”
You don’t have to look far to find the source of all this gloom. A solid economic expansion slowed to a sluggish 1.8 percent annual growth rate in the first quarter. After posting healthy gains for most of this year, the job market stalled badly in May. The rising cost of gasoline has taken a big bite out of household budgets, though pump prices have recently begun to back down from a peak of nearly $4 a gallon. After stabilizing last year, home prices have begun falling again. Since the housing bubble burst in 2006, about $10 trillion in household wealth has been wiped out. Some 12 million homeowners with mortgages — roughly one in four — owe more than their home is worth. That means they’ll be cutting into future savings to pay off a debt that will leave them with little to show for it once they’re done.
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Does pessimism raise risk of double dip? - Business - Eye on the Economy - msnbc.com
