Economists: US is still in a growth recession
Think it’s time to celebrate economic recovery? Don’t get cocky, suggests Investor’s Business Daily. In this job-starved economy, we’re already living a kind of double-dip recession that economists call a growth recession.
What’s a growth recession?
When economic growth is so low that it creates net unemployment, that’s growth recession. Growth recession can also suggest underachievement, or below-potential growth in such areas as job creation. Job contraction typically means that a country’s real gross domestic product is expanding, but too slowly.
Numbers in a tailspin
Here are just a few of the signs that a growth recession is here, writes Investor’s Business Daily:
- ADP Payroll Services found that 38,000 private-sector jobs were created in May 2011. That’s 100,000 short of the minimum goal economists had marked for economic growth.
- Employment consultant company Challenger, Gray & Christmas noted that 37,135 jobs were cut in May, a 2 percent increase from the previous month.
- U.S. housing prices fell 4.2 percent in the first quarter.
- The Mortgage Bankers Association’s mortgage application index fell 4 percent in May’s final week.
- The Institute for Supply Management’s factory activity index – an indicator of U.S. manufacturing health – dropped from 60.4 in April to 53.5 in May, the lowest score on the index since September 2009.
Re-enter the recession
U.S. gross domestic product growth was reported at 2.7 percent in May, which most economists believe is insufficient to create private sector jobs and beat back unemployment. Match this uninspiring growth with continued frantic borrowing by the U.S. government ($1.5 trillion estimated for 2011), and avoiding a prolonged double-dip recession seems impossible.
According to Michael Pento, senior economist at Euro Pacific Capital, the U.S. is following the wrong formula for economic health.
“Genuine government stimulus comes from low taxes, stable prices, reduced regulation and low debt,” said Pento. “Our economic policymakers have scrupulously avoided such remedies.”
Summer 2011 will bring economic déjà vu , says The Indypendent. The Federal Reserve is backpedaling; spending cuts and tax increases on the city and state level are in progress, and federal spending is pointing downward. Combine everything, and the U.S. will likely face not just a growth recession, but a full-blown return to depression.