Fears of double-dip recession remain

Respondents to our latest web poll are unsure if US economic recovery will stay on track.
Unemployed New Yorkers at a September 1 rally in favour of more work programmes
Unemployed New Yorkers at a September 1 rally in favour of more work programmes

America’s economy might have dodged the dreaded double-dip recession, according to our web poll last week. The result was hardly conclusive, though – looking at the spread of votes, we might as well have asked our readers if they would describe their general outlook in life as optimistic, pessimistic or somewhere in between.

More than a third of respondents said there was only a slight chance of a double-dip recession, but more than half said that the chances were either 50:50 or greater. The business media’s favourite talking heads cannot make up their minds, either. Nouriel Roubini, an economist who claims to have predicted the global financial crisis, remains in a gloomy mood and puts the chances of a double-dip at 40% (and even greater in Japan), saying that the US has “run out of bullets” to fix its economy.

Roubini and other pessimists say that America’s stimulus has run out of steam, interest rates are already at zero and the economy is on the verge of stalling, but optimists are taking heart from an upbeat jobs report released last Friday that gave analysts a pleasant surprise. Even before that, the Milken Institute of Los Angeles published a report that predicts a sustainable recovery that will produce economic growth of roughly 3.5% during the next three years.

Even the US Federal Reserve is split on what to do next. Some seem to be strongly in favour of sustained government intervention, while others worry that the Fed is getting in the way of recovery and should take a step back.

Overall, the consensus on the chances of a double-dip recession seems to be somewhere around the 35% mark. That is similar to our overall result. In total, 37% said there was a slight chance, 29% said the chances were greater than even, 27% said 50:50 and 7% said no chance.

Photo provided by AFP.

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