Wednesday, August 3, 2011

NBER Committee about US economic prospects

US economic recovery that has been lasting for 2 years is now obviously losing its pace. Economists at Business Cycle Dating Committee of the National Bureau of Economic Research, which determined the dates of recessions, don’t seem very optimistic about the nation’s growth prospects.

Committee members believe that weakness in housing, employment, and business confidence and efforts to reduce debt by consumers and government are the main obstacles to growth.

While the committee doesn’t forecast the odds of a recession, individual members can make their own predictions. Here are their comments reported by Bloomberg.

Martin Feldstein (Harvard University): now there’s the 50% chance of the US falling into new recession.

Robert Hall (Stanford University): the slower the growth rate, the more likely it is that an adverse shock would cause a recession. Consumption declines as debt repayments are reducing spending even this long after the crisis.

Christina Romer (University of California): the risks of another recession have gone up for compared to what was 6 months ago. The economist expects anemic, but positive, growth.

James Stock (Harvard University): new shock could spark a downturn, similar to the contraction after oil prices jumped with Iraq’s invasion of Kuwait in 1990. Business confidence has been shaken by the months-long debate over raising the debt ceiling.

Jeffrey Frankel (Harvard University): spending cuts will reduce US economic growth next year.
Robert Gordon (Northwestern University): the aftereffects of the housing bubble keep affecting the economy.

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