The drawbacks of recession obsession

Nancy Marshall-Genzer Dec 19, 2007


Scott Jagow: On Main Street, the mood isn’t much better.
A Reuters/Zogby poll out this morning says more people think a recession is coming — 43 percent compared to 40 percent a month ago. But the question we have is: What does that mean for the economy if a lot of people expect a recession? Nancy Marshall Genzer has more.

Nancy Marshall Genzer: Trying to predict what consumers will do isn’t easy. But that’s David Wyss’s job as chief economist for Standard and Poors. His concern is consumers’ recession obsession could snowball into a White Christmas of worry.

Wyss says if consumers stop spending, businesses stop producing.

David Wyss: If they’re afraid the fish aren’t biting they’re not going to throw out bait. They’re not going to produce goods if they’re afraid they’re going to languish on the shelves.

But so far, that hasn’t happened. Maybe because the Zogby poll also says 55 percent of the consumers surveyed said their own personal financial situations were good or excellent. Huh?

Moody’s economist Gus Faucher explains it this way: He says people worry when they see headlines about the subprime crisis, but they’re still doing OK.

Gus Faucher: As long as they have jobs, they’ll continue to spend. It’s just that growth is going to slow.

Faucher says there is still a chance of a recession. He puts it at 50 percent.

In Washington, I’m Nancy Marshall Genzer for Marketplace.

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