BOSTON There are growing fears the United States might be falling into a double-dip recession. WBUR’s Curt Nickisch joined Delores Handy on Monday’s Morning Edition to explain local economists’ take on what’s happening nationally and here at home.
Delores Handy: So the U.S. economy is supposed to be in recovery right now. And we have been seeing the unemployment rate fall here in Massachusetts. Where’s this talk of a double-dip recession coming from?
Curt Nickisch: Well, you’re seeing pretty prominent national economists — among them, Paul Krugman — saying those dreaded words more often lately because the recovery that started last year seems to be slowing.
“The fiscal stimulus, it helped for a while, but that effect is starting to fade away. And there was less underlying momentum in the economy than we thought.”
Industrial growth is waning. The volatile stock markets reflect a lot of uncertainty. Job growth is barely puttering along. And the housing market has really fallen off since the home buyer tax credit expired at the end of April.
To Nigel Gault, an economist at IHS Global Insight in Lexington, all of this is a sign that our economic recovery isn’t necessarily self-sustaining.
“The stimulus, the fiscal stimulus, it helped for a while, but that effect is starting to fade away. And there was less underlying momentum in the economy than we thought,” Gault said.
So that’s the fear. A double dip is what would happen if the economy slips back into a recession, into negative growth after this brief period of positive growth. To be fair, Gault does not think we’re headed for one, but IHS Global Insight did downgrade their forecast for this year, now expecting the U.S. economy to grow only at a meager 2 percent rate for the rest of the year.
Why isn’t the recovery stronger?
It’s partially due to global issues like the Greek debt crisis that have really affected the financial sector, but it’s also related to just how bad the recession was for businesses and consumers. Typically, recoveries happen when people feel better about the economy, leading businesses to hire and consumers to start spending more. But right now, that’s not happening. Everyone still feels pretty damaged.
The unemployment rate is still relatively high in Massachusetts, but at least there’s been some decent job growth in recent months. Can Massachusetts manage to stay afloat even if the rest of the U.S. gets dragged back under?
“This storyline of (Massachusetts) relatively better than the U.S. is likely to continue, but that doesn’t mean it’s going to be good times in the future.”
Sadly, no, although Massachusetts does have several factors going for it. The state is less driven by consumer spending than the rest of the national economy. It also produces a lot of technology and services for businesses. That’s giving it the edge over other parts of the U.S.
But these things only go so far. You still need other states, you need other countries to buy the stuff we make, and if they’re not doing well, we won’t. Michael Goodman, an economic analyst at the University of Massachusetts Dartmouth, says we’re always only going to be marginally better.
“This storyline of us relatively better than the U.S. is likely to continue, but that doesn’t mean it’s going to be good times in the future. It’s just going to be relatively better times here in the commonwealth,” Goodman said.
Both of these economists, Goodman and Gault, said they don’t expect a double dip — they do think the recovery’s going to continue. But they said it’s going to be so weak, that’s it’s not really going to feel like a recovery.