For what its worth, the latest quarterly AP Economy Survey shows a gloomier mood among economists over the last three months. As a group, their outlook is for weaker growth and higher unemployment.
Yet for some reason there is a glimmer of hope among them that a double dip recession can be avoided.
According to the survey, a majority of the 42 economists polled believe the recovery remains on track. Why?…I’m not sure.
Taken together their forecasts include:
- Economic growth the rest of this year and early next year will weaken, to less than 3 percent. From January through May, the economy grew at roughly a 3.5 percent pace.
- The unemployment rate will be no lower at the end of the year than it is now at 9.5 %. A majority think it will be 2015 or later before the rate falls to a historically normal 5 percent..
- Nearly two-thirds of the economists view the states’ budget crises as a significant or severe threat to the rebound.
And while there is nothing really new here, it’s pretty obvious the tide is shifting towards a much more pessimistic outlook. After all, it was just a few months ago when some of these same economists were looking at rate hikes in response to the rebound.
Today, they seem to have caught a case of the “new normals”—especially since a weak consumer poses a “significant” or “severe” risk to the recovery.
That’s why they have largely adjusted their growth figures to less than 3 percent going into 2011. Again, that explains why unemployment is likely to stay high since it takes about 3 percent growth just to create enough jobs to keep pace with the population increase.
For the unemployment rate to really drop, growth would have to equal 5 percent for a full year to drive the unemployment rate down by 1 percentage point.
That, to me, is a long shot in the short term. You see, it’s different this time as the chart below clearly shows.
Now if that’s not the most telling chart I’ve seen in a long time, I don’t know what is. What strikes me about though is this: It covers practically everyone’s common experience.
In other words, what it shows is a lifetime of job growth that has only recently failed us. I think that is part of the reason why so many people have a hard time grasping these new realities.
They are so different than the sum total of our experience that I think we underestimate them.
Food for thought.
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