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Where’s the U.S. economy headed?

Bob Moon Nov 4, 2010
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Where’s the U.S. economy headed?

Bob Moon Nov 4, 2010
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Kai Ryssdal: So here’s where the economy is two days after an election where the economy was a featured player: Retail sales are up, worker productivity is up, corporate earnings are up. So too was the stock market today. Job growth is still lousy, though. We learned this morning first-time claims for unemployment benefits were up last week.

So we sent our senior business correspondent Bob Moon out to find that tipping point, the one between economic growth and new jobs.


Bob Moon: At least the gauges show the economy keeps gaining some altitude. But at the Brookings Institution, economist Barry Bosworth says the headwinds remain substantial.

Barry Bosworth: We are not headed back into a double-dip recession, that’s the good news. We are going to have growth going forward. But we’re not gonna have growth at the rates that will cut into the levels of unemployment.

In other words, don’t expect much improvement when the government reports the October jobless rate tomorrow. It’ll probably remain stuck above 9 percent.

Alan Levenson is chief economist at T. Rowe Price. He says that will keep the lid on whatever recovery we can hope for.

Alan Levenson: We want to set our sights on a slower rate of growth than we were used to in the 1990s. Our expectations need to be restrained.

Bosworth: Some people refer to it as stagnation.

To Bosworth at Brookings, it sounds a lot like the kind of rut Japan has been stuck in for the better part of two decades now. Today’s stronger-than-expected rise in productivity, for example, means employers are just squeezing more out of their current workers rather than hiring. But Levenson is more optimistic.

Levenson: I wouldn’t use the term “stagnation” even to describe where we are now. I would say that we have an impaired recovery — slower growth than we should be having after such a deep recession, but that the economy is moving forward, doing the things that it typically does to heal itself and gain momentum in an expansion.

Bosworth worries consumers and businesses will get so used to the stuck economy that they stop doing the things needed to promote growth: Taking the risk to expand the company, for example, or summoning up the courage to make that big purchase.

I’m Bob Moon for Marketplace.

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