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Are We Headed for a Great Recession?

By: Brad Jackson (Diary)  |  June 3rd, 2011 at 10:00 AM  | 

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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss the worsening job market, the stagnant economy and the effect it may have on Obama’s reelection in 2012.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

May 2011 Employment Statistics from U.S. Bureau of Labor Statistics
Paltry New Job Growth of 54,000 Sends Rate to 9.1%
‘Double-Dip’ in Housing Prices Even Worse Than Expected
US Manufacturing Growth Slowest Since Sept 2009
On the Maddeningly Inexact Relationship Between Unemployment and Re-Election
Boneheaded Stimulus Never Works

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  • Death_of_the_Donkey

    I thought we already had the “great recession” from December 2007 to June 2009. I would also argue that since Gross domestic income is still not quite yet back to its pre-recession highs that any double dip would eventually be simply rolled into this original recession (semantics I know).

    As for the lack of job creation, I tend to believe three things are really holding us back:
    1) Productivity/technology – we seem to be at a point where increases in these are able to offset any demand increase without the need to add new jobs (and the job losses from these gains more than offset the job gains in the tech industry)
    2) Globalization – the world has essentially caught up with us in terms of education/innovation and coupled with productivity gains, there simply isn’t enough of a job pie to spread around to meet global demand.
    3) Lack of overall demand – the savings rate is still high (comparatively to where it had been) and demand simply isn’t growing fast enough to force the creation of new jobs.

    I want to point out that all of these factors essentially came into play during the 2001 recession, but were offset and overcome by a huge housing bubble that created (what we know now) was a fake prosperity for a short duration.

  • http://spendenforcer.com/ vortigernpendragon

    No storm clouds on the horizen

    http://www.youtube.com/watch?v=8tdW3gNfa8E

  • http://www.skiloveland.com skicougar

    the US is doing exactly what japan did, never ending spending and low interest rates.

    so, they never have any sustained economic grow. as soon as one recession ends, the next begins.

    looks like 2010-2020 is going to be one recession after another. oh boy !

  • earlgrey

    magic wand to boost spirits from August to November of 2012.

  • YnotNOW

    several interrelated factors in addition to what you cite above:
    4) Re-capitalization to make up for the losses in housing/investments keeping the savings rate unusually high
    5) Uncertainty created by government regulation and threat of further anti-business climate
    6) Uncertainty created by government deficits and threat of having to pay that back in the future
    7) Uncertainty created by all of the above affecting future economy, and therefore stiffling investment.

    So much of (but not all) is due to government mis-management preventing economic recovery to be robust.

  • acat

    That is, since there aren’t many good growth investments available at the moment (as a proxy, we’re between hot tech stocks – the last Microsoft/AOL/Google are played, the next hasn’t been spotted yet…) what’s going into savings is money that would normally be going into investments…

    Mew

  • YnotNOW

    For retirement accounts, we may be reducing spending to re-stock 401k accounts, etc. which increases capital AVAILABLE for investment (via the banks, stocks, etc.) that is significantly idle right now because of all of the above, plus:

    Companies also need to re-capitalize after their losses, and therefore are holding on to capital instead of using to grow, because they have to have debt-ratios brought back into balance.

  • Death_of_the_Donkey

    4) I agree with this, but I also think the shift to a higher savings rate may be permanent, as it was high (higher than now even) essentially up to the mid-90′s.

    5) I disagree with this. Businesses will hire when they have demand that outstrips their ability to supply it with current workforce. They will not lose business just because they fear something in the future.

    6) Again I disagree. Deficits have been played as a worry for decades and it hasn’t stopped business growth yet. This only becomes a worry when interest rates rise significantly and government starts to crowd out private sector borrowing (this isn’t happening now).

    7) Again, the only uncertainty that business typically concerns itself with is the uncertainty of demand going forward. And that is a big concern now, as consumers look less willing to spend and the developing world is tightening monetary policy.

  • drfredc

    If things don’t turn around soon, most anyone who looks back at these times is going to say the Obamanation Economy started when he was elected, turned around when he left office and returned to ‘normal’ a year or two later. Double the turnaround time if he is re-elected… :(