Commentary

Will Europe drag U.S. into double-dip recession?

Jeremy Hobson May 28, 2010
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Commentary

Will Europe drag U.S. into double-dip recession?

Jeremy Hobson May 28, 2010
HTML EMBED:
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One fear overriding the markets is that Europe might drag the U.S. into a double-dop recession. But former Labor Secretary Robert Reich says the U.S. is not that directly endangered. World investors are putting cash into dollars for safety, lowering the U.S. cost of borrowing. Home mortgage rates are also dropping, and Europe is doing more to help distressed homeowners in America than the U.S. government, according to Reich.

But that doesn’t necessarily mean the economy is back on a strong track to recovery. Reich says so far, results have been disappointing; growth in the first quarter depended a lot on store inventories and government stimulus continuing, and any boosts given the economy were temporary.

Reich notes that with U.S. employment up, consumers have more to spend, but not nearly enough to get the economy moving. Net new employmenmt is still very small relative to the number of Americans out of work, and the U.S. continues to see five job seekers for every opening. A record number of Americans have been out of work for six months or longer, and hourly wages dropped in the first quarter.

Overall, Reich sees an “anemic recover,” with a 30 percent probably of falling back into recession.

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