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'What is coming will feel like a recession'

Nouriel Roubini's economic forecast is not comforting:

At the global level, the countries that spent too much – the United States, the United Kingdom, Spain, Greece and elsewhere – now need to deleverage and are spending, consuming and importing less.

But countries that saved too much – China, emerging Asia, Germany and Japan – are not spending more to compensate for the fall in spending by deleveraging countries. Thus, the recovery of global aggregate demand will be weak, pushing global growth much lower.

The global slowdown – already evident in second-quarter data for 2010 – will accelerate in the second half of the year. Fiscal stimulus will disappear as austerity programs take hold in most countries. Inventory adjustments, which boosted growth for a few quarters, will run their course. The effects of tax policies that stole demand from the future – such as incentives for buyers of cars and homes – will diminish as programs expire. Labor-market conditions remain weak, with little job creation and a spreading sense of malaise among consumers.

The likely scenario for advanced economies is a mediocre U-shaped recovery, even if we avoid a W-shaped double dip. In the U.S., annual growth was already below trend in the first half of 2010 (2.7% in the first quarter and estimated at a mediocre 2.2% in April-June). Growth is set to slow further, to 1.5% in the second half of this year and into 2011. Whatever letter of the alphabet U.S. economic performance ultimately resembles, what is coming will feel like a recession.


By Ezra Klein  |  July 19, 2010; 1:21 PM ET
Categories:  Economy  
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Comments

This is pretty much the consensus from what I read, although maybe just a tad gloomier. But not by much. Unless there are jobs programs like green tech and infrastructure, the unemployed aren't going to find much. Meanwhile, we are cutting the school day in many places so that in CA it will be 50 days a year behind places like Switzerland and Korea. Good luck with having an adequately trained workforce when, if ever, the jobs come back.

This is the consequence of redistributive policies that have concentrated wealth in the top 1% (really the top .5%) over the past 30 years. The consumer ain't going to be consuming much for the foreseeable future. Businesses can't sell to each other if there is no end demand for goods and services. You can only by so many yachts (Fiorina--2) and houses (Cindy McCain--9) if you are rich.

Posted by: Mimikatz | July 19, 2010 1:40 PM | Report abuse

"...what is coming will feel like a recession."

Hence the need for more tax cuts.

Now that that's taken care of, why don't the rest of you go out and play. Winter doesn't wait, and you'll be stuck inside all day then.

Posted by: davis_x_machina | July 19, 2010 1:40 PM | Report abuse

For what it's worth, the ECRI's weekly leading index has basically called another full blown recession based on the growth rate.

http://www.businesscycle.com/resources/

It's only one source to consider, and the index level has been extraoridnarily volatile as of late, but given the backdrop it isn't implausible.

Posted by: justin84 | July 19, 2010 2:02 PM | Report abuse

This is exactly why we need a new word for bad economies other than recession. We should have a word for something that "feels" like a recession but doesn't fit the technical definition.

Posted by: MosBen | July 19, 2010 2:03 PM | Report abuse

Will it feel like 20% joblessness too?

Posted by: FastEddieO007 | July 19, 2010 2:03 PM | Report abuse

I'm sure it has nothing to do with the uncertainty the US business community feels regarding very complex legislation like Healthcare and FinReg which require a 1099 form for every $800 paid out, allows for unpprecedented command of private instiuttions by the most powerful executive branch ever created in a democracy, and extremists threats by the EPA to punish successful American enterprizes for emitting CO2---something every single living thing emits.

Not to mention a moratorium on oil rigs in the Gulf that represent 75% of all the oil that the USA gets from the Gulf.

Could we have elected an adminnistration more hostile to American business than these socialist radicals?

Posted by: FastEddieO007 | July 19, 2010 2:07 PM | Report abuse

Eddie,
It's a moratorium on drilling, not on oil rigs. There are plenty of oil rigs out there producing oil.

Posted by: mschol17 | July 19, 2010 2:11 PM | Report abuse

It will get really ugly out there for a few years. I figure that will put Republicans in good position to retake the House, Senate, and presidency in 2012.

I wonder how many liberals will be pleading for the end of the Senate filibuster in that political environment. I bet not many.

Posted by: lancediverson | July 19, 2010 2:29 PM | Report abuse

that's hogwash mschol17.

http://www.cnbc.com/id/38221974

Two rigs have left already. And if the moratorium remains in place even more will leave. And they will take jobs with them.

Either you're misinformed or you are knowingly stating falsehoods.

Posted by: skipsailing28 | July 19, 2010 2:37 PM | Report abuse

'What is coming will feel like a recession'


and when will it stop being GWB's fault?

Posted by: visionbrkr | July 19, 2010 2:48 PM | Report abuse

Roubini appears to be more bullish now ("mediocre U-shaped recovery") as compared to his doomsday, financial catastrophe predilictions during his appearances post-TARP on CNBC and other media outlets.

One of the keys to watch may be Australia. Their economy is highly dependent on Asian demand (read as China). Also, Roubini doesn't make any mention of the role that the booming LatAm nations have played in the global economy of late.

Posted by: tuber | July 19, 2010 2:55 PM | Report abuse

"and when will it stop being GWB's fault?"

When did the Great Depression stop being Herbert Hoover's fault?

Posted by: tuber | July 19, 2010 2:57 PM | Report abuse

Well said, tuber.

Posted by: MosBen | July 19, 2010 3:13 PM | Report abuse

Two questions the liberals cannot answer:

Where are the jobs?

Where are the jobs?

The liberals will blame President Bush for everything for as long as the electorate permits it. Already they look weak in the extreme as they try to shift blame.

It would be a heck of a lot easier for them if they hadn't insisted on all that looting of the treasury.

Has any liberal here seen the reports on the dealership closings? the government looks mighty bad. As it should. the wonks in Washington cannot run everything. They only think they can run everything.

Time to fire the career politicians. Time to lay off the non military federal work force

Posted by: skipsailing28 | July 19, 2010 3:35 PM | Report abuse

"When did the Great Depression stop being Herbert Hoover's fault?"

I'd say June or July 1933.

http://en.wikipedia.org/wiki/National_Industrial_Recovery_Act

http://www.themoneyillusion.com/?p=48

http://www.themoneyillusion.com/?p=4220

Posted by: justin84 | July 19, 2010 3:41 PM | Report abuse

"Where are the jobs? Where are the jobs?"

"Time to lay off the non military federal work force"

Dolts like skip are why we can't have nice things.

Posted by: lol-lol | July 19, 2010 3:43 PM | Report abuse

justin84, that the Roosevelt Administration did things which also contributed to the Great Depression doesn't let Hoover off the hook. Similarly, GWB will always be responsible for the policies of his administration, and those policies will have effects long after he's left office. Whether historians blame some of the Obama Administration's actios for prolonging the bad economy or not, it will never not be GWB's fault. It will just also be President Obama's fault. What actions he has or hasn't taken which are contributing our the slow recovery, however, are going to continue to be debated here and elsewhere.

Posted by: MosBen | July 19, 2010 3:49 PM | Report abuse

justin,


thanks. So by those calculations, when you factor in the liberal psyche, add in the party of "no" political rhetoric, include the lack of blame for anti-business politics of the current administration and I'm guessing the date might be June 2050 give or take a couple years.

Posted by: visionbrkr | July 19, 2010 3:53 PM | Report abuse

"Roubini doesn't make any mention of the role that the booming LatAm nations have played in the global economy of late."

He probably doesn't expect to jump-start his car from a lantern battery, either.

Posted by: davis_x_machina | July 19, 2010 3:59 PM | Report abuse

"I'd say June or July 1933."

If you trust Wikipedia:
http://www.wikimedia.org/wikipedia/en/wiki/Historical_rankings_of_United_States_Presidents

Page down to the color-coded boxes. Hoover was blamed for the Great Depression long after 1933 if his unpopularity over a 60 year period is any indication.

Posted by: tuber | July 19, 2010 4:02 PM | Report abuse

"He probably doesn't expect to jump-start his car from a lantern battery, either."

If you wire a series of lantern batteries together...

Posted by: tuber | July 19, 2010 4:05 PM | Report abuse

Right, tuber. People still blame Hoover for the Great Depression while also arguing that some of Roosevelt's policies also contributed to the continued bad economy. It never stopped being Hoover's fault even if it was *also* partially Roosevelt's fault too.

This recession will always be GWB's fault, even if we eventually decide that some of the Obama Administration's also are blame-worthy. I tend to think that not passing a larger stimulus is something the Obama Administration did (or really that Congress did) that hasn't helped, but that doesn't mean I'm ever going to draw some arbitrary line in the sand where somehow the decisions GWB made as President stopped having an effect.

Posted by: MosBen | July 19, 2010 4:16 PM | Report abuse

"justin84, that the Roosevelt Administration did things which also contributed to the Great Depression doesn't let Hoover off the hook."

Oh I agree. I think Smoot Hawley, The Revenue Act of 1932 and the Emergency Relief and Construction Act all were clear negatives and can be laid at Hoover's feet. He also tried to prod businesses into keeping wages high, which in so far as he was successful likely caused the economy to shrink as the prices of firms goods and services were crashing.

As for the primary causes, I would blame the Fed and state level unit banking laws - Hoover himself probably shouldn't be considered a 'cause' of the Depression, only an intensifier. He was in office only a few months before it began.

"Similarly, GWB will always be responsible for the policies of his administration, and those policies will have effects long after he's left office."

Agreed, although I think the only problem with Dubya in terms of causing the last recession is that he didn't put any roadblocks between the housing market and cheap credit.

I guess all I'm saying here is that there is pretty compelling evidence that FDR and Congress were net negatives during the 1930s. Proding firms into monopolies and artficially raising wages in a deflation is never going to get you out of a slump. I'm sure the public works people appreciated their jobs, but those were never going to lead to a lasting recovery. Outside of that, going off gold looked to be a winning strategy for FDR until the NRA and cartelization / wage hikes occurred.

Posted by: justin84 | July 19, 2010 4:17 PM | Report abuse

Sorry for the incorrect link. I mangled the original url which was retrieved with the help of a new Firefox addon.

The link to the Wikipedia "Historical rankings of United States Presidents" should be:

http://en.wikipedia.org/wiki/Historical_rankings_of_Presidents_of_the_United_States

Posted by: tuber | July 19, 2010 4:20 PM | Report abuse

Have liberals ever considered the possibility that everything that elite academia and "Nobel-prize" winning economist Paul Krugman have told Obama to do has been wrong and bad for the health of our capitalist economy?

Posted by: FastEddieO007 | July 19, 2010 4:21 PM | Report abuse

"thanks. So by those calculations, when you factor in the liberal psyche, add in the party of "no" political rhetoric, include the lack of blame for anti-business politics of the current administration and I'm guessing the date might be June 2050 give or take a couple years."

Visionbrkr,
That seems like a fair median estimate, albeit with a distribution heavily skewed towards 2051 and beyond.

"Page down to the color-coded boxes. Hoover was blamed for the Great Depression long after 1933 if his unpopularity over a 60 year period is any indication."

Tuber,
I don't think Hoover's actions were a net plus for the economy as explained above. I also think FDR had started a reflation by going off gold in early 1933, but then intervened in the summer of 1933 and made the 1930s recovery much slower than it had to be.

Given the rapid increase in industrial output after going off gold (57.4% growth from 3/33-7/33, recovering a bit more than half of the total decrease in output during the entire 7/29-3/33 period), reflation looked like a huge winner, but then after the government imposed wage hikes and grouped industry into cartels, industrial production fell 18.9% over the following four months (for comparison, industrial production only fell 15.1% during the great recession over a ~2 year period).

http://research.stlouisfed.org/fred2/data/INDPRO.txt

Had industrial production continued to have grown at just 6%/month instead of the 12.1% average rate of 3/33-7/33, industrial production would have been at a new high by 12/33, rather than 12/36 (a level which was promptly taken out by a new recession, also attributable to a real wage shock).

Posted by: justin84 | July 19, 2010 4:39 PM | Report abuse

justin,


I've often wondered myself how bad the economy would be if there were simple roadblocks like market driven interest rates and better requirements on lenders and stricter loan to value requirements.

I'm also interested to see if anyone's ever tried to evaluate "blame" and see how much responsibility the public has vs. private business. To find it in a non-biased way I'm guessing would be next to impossible.

MosBen,

agree wholeheartedly. GWB deserves the blame for the economy and Obama deserves credit for the recovery (of sorts) but also deserves blame for the recovery being stunted.

Posted by: visionbrkr | July 19, 2010 4:44 PM | Report abuse

Its time to fire career politicians. I agree, Term limits for every politician both sides would make me happy. The political class has been ruling the working class for too long, let someone else have a voice.

Posted by: realtorheath | July 19, 2010 5:27 PM | Report abuse

I don't understand why we blame or praise the presidents for the economy. The current situation is a direct result of the consumer driven misallocation of capital to the housing sector in 2002-2007. Following the tech stock bubble, enron, and 9/11 Americans by and large started looking at housing as a good, safe investment. Real estate agents and programs and policies designed to encourage home ownership instead enabled real estate gambling, as people bought to flip, acquired multiple homes, took out all of their equity in cash out refis, and generally went all in on a bigger sucker type bubble. Housing construction drove too many people into that sector, who now constitute a large portion of the unemployed.

We love to blame politicians, banks, and others with "power", but this one is actually our fault. Sorry, people. Sure, GWB squandered the surplus, the Fed applied stimulus too long, banks made risky decisions, etc., but the massive wealth loss that actually impacted our behavior and our economy was the housing crash.

Posted by: staticvars | July 20, 2010 12:37 AM | Report abuse

Does ahnyone besides me wonder how much the CATO Institute pays Justin Logan to monitor Ezra's blog and argue with people all day?

Posted by: Patrick_M | July 20, 2010 5:42 AM | Report abuse

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