white house thinks US won’t be fall into recession

Posted on February 12, 2008

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Perhaps Senator Barack Obama’s message of hope is so infectious that it has even permeated the White House.

In a one-two punch today, two of the president’s men claimed through different forums that recession in the US economy is not looming and probably will pass the country by.

The chairman of the White House Council of Economic Advisers Edward Lazear said while submitting the White House’s annual report on the economy to Congress, “I don’t think we are in a recession right now, and we are not forecasting a recession. We are forecasting slower growth.”

Meanwhile, Federal Reserve Bank of St. Louis President William Poole told reporters after a speech in St Louis that the country could avert a recession, making the distinction that consumer spending is “soft” but it is “completely different from crashing”, according to Bloomberg.

Both also point to the $168 billion stimulus package and the interest rate cuts by the Federal Reserve as instances of action that would stop the economy’s descent towards a recession.

The administration adds that it predicts economic growth of 2.7 per cent this year, while unemployment stays at 4.9 per cent.

All these flies in the face of grim data that has been coming out in the last few weeks, which suggest that the US economy is dangerously on the brink of a recession, if not already in one.

Tempering it with euphemisms like “slower growth” is not going to stem the tide, no matter how much the Bush administration hopes to play down the problem.

The economy grew at a 0.6 per cent annualized pace in the fourth quarter, which makes it the slowest growth rate in five years. This comes after a 4.9 per cent growth rate in the previous quarter.

Job losses surfaced in January’s data, with a dip of 17,000 jobs in non-farm payroll employment, led by declines in construction and manufacturing jobs. This makes it the first time the US has reported job losses since August 2003, and follows the trend of weaker job growth in 2007 in comparison to 2006.

Activity in the non-manufacturing sector in January was also gloomy, which recorded its first downturn since March 2003.

It would be interesting to see what retail sales figures would be like when it is released this week, but analysts are already predicting a second consecutive decline to the effect of a 0.3 per cent contraction.

While the subprime mortgages problem continues to rise and more bodies remain to be found, borrowers with good credit are increasingly swarmed, the New York Times reports. Other signs that the credit crunch is making its effect felt in other areas include rising credit card debt, more problematic auto loans and increasing bankruptcy.

We are bombarded every day with news of the ailing health of financial companies, from massive losses in big-name banks to hedge funds collapsing.

Top economic experts predict that the economy will go into a recession this year, which they define as a contraction in activity that lasts for at least two consecutive quarters.

And the Bush administration continues to operate in dreamland.

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Posted in: economy, politics, US