The U.S. economy is slowing in the second quarter

Hand holding dollars with U.S. flag in background.

JEREMY HOBSON: Now let's get to the G8 meeting which is wrapping up in France. In a statement this morning leaders said rising commodity prices are a threat to the global recovery But they said they remain focused on shoring up the sustainability of public finances. In other words -- getting the debt situation under control.

Let's bring in Chris Low, chief economist at FTN Financial, who joins us live every Friday from New York. Good morning.

CHRIS LOW: Good morning.

HOBSON: Well, Chris as we look at this dichotomy of a fragile economic recovery and a need to deal with debt, I want to focus on the U.S. first of all. Given all the data we've gotten this week how fragile is our recovery right now?

LOW: Well, it's pretty clear things are slowing down in the second quarter. Since the middle of April we've had an increase in the number people filing for unemployment insurance that has completely reversed the whole decline that took place in the first quarter. And then we also have a bunch of regional Fed banks telling us that manufacturing is slowing down around the country too.

HOBSON: So things are slowing down, is there any chance that Washington looks at that and says, "You know what, maybe we shouldn't be cutting so quickly?"

LOW: No. I don't think so. And actually the news this week out of Washington is that the Biden commission on the deficit is pretty close to striking a deal which is going to cut spending and or raise taxes $3- to $6 trillion over the next ten years. So in fact, the government's moving in the opposite direction away from stimulus.

HOBSON: Well should we be worried about that in terms of our economic recovery?

LOW: Well, you know we've always reached this point in the recovery where the government has to step back. It can't keep increasing spending forever. And we always worry. But it usually turns out OK. And I think the reason it'll turn out OK this time is that the U.S. economy is of course a consumer driven economy. The slowdown is coming now mostly because gas prices are high, and we will get some price relief later in the year because of the austerity that's taking place everywhere else in the world.

HOBSON: Chris Low, Chief economist with FTN Financial, thanks so much as always.

LOW: You're welcome. Thank you.

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