Economic Forecasts

It Just Feels Like a Double-dip Recession

With housing continuing to wallow at the bottom and millions of pink-slipped workers still unemployed, it seems as if the economy is sliding back into recession. But is it?

The economy seems especially fragile these days, as if the United States is teetering on the edge of recession. That’s the way it is when GDP is gaining at a rate of 2% or less, as it has been for some months: There are stronger areas — Texas, North Dakota, Milwaukee, Washington, D.C., and San Jose, Calif., for example. And some weaker areas, including much of California as well as Nevada, Phoenix, Atlanta and Tampa, Fla.

With industries, the same spotty pattern prevails. Orders roll in for makers of medical devices, earth-moving equipment and a variety of exports. But housing and real estate are still in deep distress. Similarly, job seekers face a mixed picture: More than enough jobs for petroleum engineers, accountants and medical technicians. But teachers and other public sector employees are being laid off. And for the 7 million workers who lost their jobs during the downturn and still aren’t able to find work, the recession hasn’t ended. They continue to suffer.

But the odds of actually returning to recession — at least six months of declining national production — are still relatively low. Many of the economic hits this spring were one-time events and aren’t likely to be reprised — or at least they aren’t likely to pile one on top of another again. The combination of tornadoes ripping through broad swaths of the country, widespread Mideast turmoil sending gasoline prices near $4 a gallon, and the one-two punch of disasters in Japan was extraordinary.

kwl
kwl

The next few weeks will provide key signals about what’s ahead — indications of whether growth is in real danger of reversing course or will just continue weakly. The July 8 employment report for June, for example, needs to show much more vigor. Sustained economic growth requires net job gains of about 150,000 a month. So far this year, the average is just 72,000; for May, it was only 54,000. Also critical: no further slowing of manufacturing. (A July 1 purchasing managers survey will tell the story.) And an upward tick in June auto sales indicating that Japan’s economy and supply lines are coming back.

The best to expect is probably continued wobbly, weak GDP gains, with three or four more years to go before the economy begins to feel a great deal better. It’ll take that long for employment to again reach the prerecession high-water mark of 138 million and for unemployment to fall below 6% or so.

The fact is, this last recession was different from most. It was born in a housing bubble and sparked by financial crisis. It typically takes longer to recover from downturns arising from financial crises. And housing is usually one of the chief engines of growth following recessions; the Federal Reserve lowers interest rates, encouraging demand for mortgages and housing and spurring growth. That can’t happen this time.

Recovery will be slower, as the economy shifts to rely less on consumer spending and more on exports and business investment. It’s a worthy destination, but the trip won’t be a pleasant or smooth one.

Most Popular

Tax Wrinkles for Work-at-Home Employees During COVID-19
taxes

Tax Wrinkles for Work-at-Home Employees During COVID-19

Are your home office expenses deductible? How does going out of state to work for a while affect your tax picture? There are some interesting wrinkles…
November 9, 2020
Retirement: It All Starts with a Budget
personal finance

Retirement: It All Starts with a Budget

When you’re meeting with your financial planner, do you talk about your budget? If not, you should.
November 10, 2020
Will Joe Biden Raise YOUR Taxes?
taxes

Will Joe Biden Raise YOUR Taxes?

During the campaign, Joe Biden promised that he would raise taxes for some people. Will you be one of them?
November 10, 2020

Recommended

Kiplinger's 2020 Election Forecast
Politics

Kiplinger's 2020 Election Forecast

For nearly a century, The Kiplinger Letter has forecasted the outcome of presidential elections to keep readers informed of what's coming and what it …
October 29, 2020
Election 2020: Joe Biden's Tax Plans
taxes

Election 2020: Joe Biden's Tax Plans

With the economy still in trouble, tax policy takes on added importance in the 2020 election. So, let's take a look at what Joe Biden wants to do abou…
October 22, 2020
PPP Loan Forgiveness Applications are Now Easier
Coronavirus and Your Money

PPP Loan Forgiveness Applications are Now Easier

Small businesses that received PPP loans of $50,000 or less can now apply for forgiveness using a simplified application form.
October 16, 2020
The Most Expensive Natural Disasters in U.S. History
Economic Forecasts

The Most Expensive Natural Disasters in U.S. History

Wind, water, fire and drought have all wreaked havoc on the United States. What’s been the worst?
August 26, 2020