Economists Say There’s a 30% Chance of Another Recession

17 Aug

By JasmineHughes

Predictions of the economy slipping into another recession have risen and forecasts for economic growth and employment advances have fallen, according to USA TODAY’s quarterly survey of top economists.

The 39 economists polled put the chance of another downturn at 30%, which is twice as high as three months ago. That means yet another blow for the already weakened economy, and with stock market declines and the European debt crisis, the U.S.remains on the ropes.

Even if the U.S. avoids a recession, economists still expect to see slow economic growth, about 2.5% in the next year. If unemployment is to be cut significantly, the economy must grow well above 3%.

“We’ll continue on a path of pretty slow and disappointing growth, but probably there’s not a decline into recession,” says Robert Mellman, senior economist for JP Morgan Chase.

In light of the recent European debt woes, the government cut its growth estimates for the first half of 2011 to less than 1%, and Standard & Poor’s lowered the USA’s credit rating after the showdown over the debt ceiling.

U.S. consumer confidence in early August sank to its lowest since 1980, according to the Thomson Reuters/University of Michigan survey released Friday.

Mellman says the biggest threat to the recovery is the stock market moving lower or sideways the next few months, weakening already slow consumer spending.

However, Mark Zandi, chief economist of Moody’s Analytics, is more optimistic. “The fundamentals of the U.S economy are strong,” he says, noting that companies, consumers and banks have all improved their balance sheets and that corporations are sitting on record cash reserves. The main problem, he says, is “a crisis of confidence.”

To solve it, Zandi expects the Federal Reserve to buy more Treasury bonds to lower interest rates and drive investments to stocks. Almost a third of the economists surveyed expect the Fed. Reserve to begin another stimulus in the next six months.

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About jasminesnroses

Hello World. I’m a recent graduate of Rutgers University, trying to make my mark. I have many interests, curiosities and ideas. All of which can be found here. So stick around =)

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