An article on MSNBC.COM by John Schloen indicates that the outlook for the U.S. economy just went from half-full to half-empty.
The latest economic data out this week confirmed a gloomier forecast issued by the Federal Reserve Tuesday after its regular rate-setting meeting. That has renewed fears of a so-called “Double-Dip” recession that are weighing on investors, spooking consumers and slowing businesses from hiring.
Many economists argue that a recovery, slow but steady, is still intact. But growth forecasts are falling, and the odds of another contraction are rising.
The next couple of months or quarters will determine whether the economy double-dips or whether it actually picks up a little momentum,” said Stuart Hoffman, chief economist at PNC financial.
After a surge in growth rate last year and in early 2010, the government estimated last month that gross domestic product grew at a 2.4 percent in the second quarter, down from 3.7 percent in the first three months of the year.
But fresher data suggest the economy may have barely grown at all in the quarter, and early results from the current third quarter are not too encouraging. As a result a midsummer stock market rally was abruptly halted this week and the stock market reversed course, dropping about 4 percent in just a few sessions.
Meanwhile the painfully weak job market shows no signs of improvement. The economy has added a paltry 650,000 jobs this year and the official unemployment rate remains at a recessionary 9.5 percent. A report Thursday showed that first-time claims for jobless benefits rose in the latest week to 484,000, the highest total since February.
Though consumers continue to pare down debt, they’re still struggling to pay off the huge borrowing spree of the past decade.
There is little incentive for builders to build, especially because the flow of home foreclosures shows little sign of abating. Banks have stepped up repossessions this year to clear out the backlog of bad loans, pushing the foreclosure rate higher for eight straight months and creating a huge backlog of unsold homes.