By Scott Howard, Economist, Macroeconomics, RISI
BOSTON, MA,
July 26, 2010 (RISI) -
There was a time, not long ago, when economists and government officials dismissed out of hand the possibility of a double-dip recession. After all, real GDP growth accelerated considerably toward the end of 2009 and posted an annualized advance of 5.6% in 4Q09. Then came the final number for first quarter growth that showed a slower 2.7% annual advance. A few people started talking more seriously about the possibility, especially since final sales (which excludes the contribution from inventory adjustments) slowed from a mere 1.7% annual rate in 4Q09 to 0.8% in 1Q10. Is a double-dip really possible? Or, dare we say, is it likely?
Many workers, households, and businesses haven't experienced anything close to a normal recovery anyway, so for them, there isn't far to fall. Unemployment has not budged from the high 9's and private sector job creation since the 'trough' of the cycle has been virtually non-existent. Moreover, 6.8 million people (nearly half of all unemployed people) have been unemployed for over six months. Tell them that the US economy has been recovering.
If you're connected to the housing market, which many readers invariably are, then things haven't improved at all. The first-time homebuyer credit and the extended and expanded version helped prop up home sales in 2009 and until recently in April. Now that those incentives are gone, we expect sales to tumble again. The inventory of unsold homes is still high and likely to restrain construction for some time. Actual housing starts have, of course, fallen below 600,000 units on an annual basis, though that's not far from the recent peak of 659,000 in April 2010, 10 months into the 'recovery.'
This is an excerpt from a full story that is available in RISI's Pulp & Paper News Service
