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July 30, 2011 in Nation/World
Economy staggers, and may get worse
Low growth, joblessness mar first half of year
WASHINGTON – The U.S. economic recovery faltered dramatically in the first half of the year, and that means more trouble ahead.
The latest Commerce Department figures show that the nation’s economic output was gasping for breath long before the debilitating debt-ceiling debate took center stage, further dimming prospects for 14 million unemployed Americans.
The nation’s total economic output grew at an anemic annual rate of 1.3 percent from April through June, below already weak expectations. And the government sharply scaled back its estimate of first-quarter growth to a feeble 0.4 percent, the lowest figure since the recession technically ended two years ago.
“These are disastrous numbers for the economy,” said Bernard Baumohl, chief global economist at the Economic Outlook Group. “We’re seeing some clear, concrete signs that the economy is teetering on the edge of recession.”
Those fears and the continuing debt-ceiling standoff ripped through the financial markets Friday, pushing the Dow Jones industrial average down 96 points to its sixth consecutive loss. It was the worst weekly performance for the index in more than a year.
Economists are now talking more freely about prospects of a “double-dip” recession. Nariman Behravesh, chief economist at IHS Global Insight, pegs the odds at 30 percent.
“When growth is so weak, it’s not going to take much of a shock to push us over the edge,” he said, noting that a surge in oil prices, now less than $100 a barrel, to $110 a barrel could do it. “Add on top of it all this stupidity in Washington and this is a very risky situation.”
On a practical level, the new data show the economy is not generating nearly enough horsepower to spur employers to hire. That means consumers will continue to keep a tight lid on the kind of spending needed to boost demand and get more people working.
Consumer spending increased just 0.1 percent in the second quarter, a key reason for the slow growth. And weighed down by the political stalemate over the debt ceiling, consumer attitudes only worsened in July.
Consumer confidence plunged this month to its lowest level since early 2009, according to the Thompson Reuters/University of Michigan Survey of Consumers released Friday. The outlook by consumers for their finances was “quite bleak” and their spending will be “barely higher” in the second half of the year, predicted Richard Curtin, the survey’s chief economist.
The U.S. economy has been buffeted this year by harsh winter weather, soaring gasoline prices because of Middle East unrest, and supply chain disruptions in the automotive and electronics industries caused by the Japanese earthquake and tsunami.
Adding to the economic woes is the looming threat of a U.S. default or credit rating downgrade because Congress and the White House have been unable to raise the nation’s $14.3 trillion debt ceiling.
“It’s creating a big issue for consumers and businesses,” Behravesh said of the uncertainty over what a debt ceiling deal would include.
President Barack Obama used Friday’s economic data to push lawmakers to strike a deal before Tuesday’s deadline for raising the debt ceiling. And one of his top economic advisers, Austan Goolsbee, warned that U.S. officials must “end the uncertainty surrounding the risk of default.”
“We are at a fragile moment in the world economy and cannot afford to do anything to undermine our recovery at a moment such as this,” said Goolsbee, chairman of the Council of Economic Advisors.
The steep cuts in federal spending that would be triggered if the government could no longer borrow to pay all its bills probably would force the economy to contract in the third quarter, Baumohl said. The odds that such a contraction would last for two quarters – the technical definition of a recession – are increasing given the weak growth, he said.
“It clearly shows that people continue to be gripped by uncertainty and that has increasingly crippled consumer spending and business investments,” he said. “All of these things together are really making it very difficult for the economy to move forward.”
Stocks plummet as outlook in Europe dims 
polistra on July 30 at 4:47 a.m.
Why does anyone listen to economists? They have been 100% wrong about everything for many decades. They haven’t predicted a single crash. The few that do predict a crash (like Peter Schiff) do so because they’re always predicting doom.
Two kinds of stopped clocks, no ticking clocks. No science.
idahocity on July 30 at 6:59 a.m.
busts always follow booms when you use the babylonian monetary system/federal reserve cartel banking. the roaring 20’s followed by the great depression. a war was needed to pull the country out. there were 2 previous private central banks in the u.s. ending in busts. we’ve forgotten history and we’re going to repeat it.
JBlim on July 30 at 7:23 a.m.
polistra, actually, economists have been 100% right about everything for many decades.
norpass on July 30 at 8:19 a.m.
The econony staggers and WILL get worse. There are no jobs. Washington (you know, Babylon-On-The-Potomac?) can’t seem to find a way out of this mess. Congress squabbles, the President wobbles, and ‘we the people’ are relegated to the sidelines with cup in hand.
However, Congress managed to “bailout” Wall Street. Well and the airlines and the auto makers and stimulus programs that stimulated nothing.
Debt ceilings, debt clocks, staggering deficits, and here we all stand. Waiting for that eerily mysterious “bipartisan compromise.” I get the sense that Congress could NOT compromise on which day of the week they’ll all decide to declare “RECESS” and go off somewhere, anywhere, except back to their home districts to have to face those of us without.
de3 on July 30 at 8:44 a.m.
Please vote out all incumbents from all offices. Its time for some genuinely new ideas, not the same old games. And yeah, economists have made fools of themselves. Repeatedly.
Charlie on July 30 at 8:48 a.m.
Economist are like weather forecasters, they keep making predictions that don’t come to pass!
Scoutster on July 30 at 8:52 a.m.
The economy is operating exactly as it was planned to do over the last 35 years.
For the top 1%, these numbers are neither unexpected nor problematic.
bdr on July 30 at 9:28 a.m.
Its all man made hype…..don’t worry about the numbers just worry about the wars that may ensue over the bills.
The_Seer on July 30 at 9:30 a.m.
idahocity: We are in three/four/five wars right now, shouldn’t the economy be sailing along like the original ideas that never seem to enter a Bagger’s head?
Soutster: Exactly. When one looks back on the last forty years of dismantling organized labor and decimating the U.S. middle class through planned policies one should not be surprised whatsoever.
mikeln on July 30 at 11:25 a.m.
It is time to make america for all the people, not just these so called job creators. We do not need them, but alas, they have convinced a number of people that we can not live without them. They are facist, plain and simple, who could care less about the average person, except to enslave us for thier enjoyment. As in the past, we will end up dragging these people into the streets and hanging them because the government is one of thier slave holdings and will do nothing to protect us from them. The american people, mankind itself, can not move forward with these kind of people in control. We can only hope there are factions in the military that will refuse to attack thier own and side with us to bring these parasites down.
idahocity on July 30 at 12:21 p.m.
seer, good point. doesn’t seem like war, more like bullying to me. iraq’s oil did help prop the dollar up for a few years since the dollar is kind-a-sort of oil backed. if we wrote off the fraudulent debt, cease garrisoning the whole world we could be out of this mess. we’d have to get rid of the dems and republicants too or we’ll be right back in this mess in a generations time.
jdodgion on July 30 at 2:42 p.m.
Why would any one listen to economists or Politicians…………???