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Is U.S. Facing Double-Dip Recession?

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    Reuters Economic Correspondent Pedro da Costa on the economic downturn.

  • Duration 7:04
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Well today both C and JPMorgan Chase cutting US growth forecast.

JPMorgan saying GDP will grow only -- but it.

A half percent in the first quarter of 2012.

Half percent this of course instead of one and a half percent is not good -- -- look at it.

This could put us closer to yet another recession yeah I said it everybody's seen it these days so is this where we're headed.

-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- sirens you know our word again many -- -- argue with you though that we never got out of first one.

That's right and there is that impression is actually been a very seems like a very academic discussion about whether this would constitute a double dip recession.

Or whether it's a near recession altogether whether as He says.

It's just 11 big bad one of course for them fourteen million Americans are unemployed it certainly feels like the recession never went away.

Some of the GDP forecast -- talk about her pretty interesting.

The -- like to joke that the JPMorgan forecast revision has become a weekly occurrence because.

They started off the year looking for very strong growth they're talking about upside risks to inflation even the potential for fed tightening if you can imagine that and now.

Not only -- they revise the Q1 forecast says He said that they revised Q4.

From.

For this year down from 2.5 percent to 1%.

So that leaves us basically on the borderline of recession is so it's a pretty scary prospect and one that raises the possibility that.

The Fed might once again have to step in.

Yet -- Citigroup as well but cut its 2011 growth forecast to one point six from one point seven next year down to two point one.

Morgan Stanley comes out and says we are dangerously close to recession I mean it is dooming gloom everywhere you up a quick frankly.

Do we need a name on this do we need to moniker I mean you know.

-- -- equity in my home mum worried about my job and milk is like 377 and down which is out of control so why -- can't -- call.

No we don't need -- -- necessarily I think for the average American it really doesn't matter what you call it it's just doesn't feel that good if you.

Have a job you worried about losing it and if you don't have one you're having a really hard time finding -- so thank you said it did the linguistics really doesn't matter I think the dangerous thing about.

I think the important thing to keep in mind about this sort of gross level is that.

There's a high historical precedent that when growth is below its potential which people see it about two and a half to 3%.

It actually is it it lose it doesn't have any kind of buffer against shocks so -- you have some turbulence in Europe that's affecting our banks.

So if that hits us hard enough.

That's where one shock away from a recession basically so that's what worries policy makers and that's was what has economists frantically revising down their forecasts.

Well that one shock could be your rate I mean we have.

-- all the -- in the world on the shoulders of Angela Merkel in Germany right now and the Germans are soon -- and to help and -- Europe so.

That could be the one shocked that -- over the edge couldn't.

It -- -- if they they column Merck cozy now right that's yeah I think that that Merkel sort of marriages are -- -- America and so.

Yes that there there there that you people of course that that are in control of the two largest economies in the eurozone they of course have the power to do.

What is needed of course.

I think economists have largely come to the point where they agree on what the solution needs to be.

It needs to -- the -- drastic solution one that doesn't involve a break -- of the union is for it.

-- to be a greater fiscal union so for the -- to start issuing bonds itself of course some that means some of the rich countries bearing the brunt for some of the for once.

Which is politically unpopular at home but I think the job that Merkel and Sarkozy.

Have domestically is to convince their public -- actually their interest their intertwined with Europe's.

Their banks are the ones holding that some of those peripheral European debt.

So you know the linkages -- are far too many for them to completely ignore it and say we can just leave it -- in Greece and forget about it because it's not gonna happen.

They'll come back to hunt down and if it does they'll come back to hunt suspect here so.

But that's it from -- and it's the contagion and you're right Germany as the architect of the EU is not going to let that be be fell at all but -- -- comes back home and here at home were already looking -- disciplinary -- to use this stagflation.

Word.

You know economy stagnant inflation on their eyes.

You get in a consciously you -- your words there stagflation is rate there in front of us the you think that's an issue you know.

I actually don't because if you look at the inflation data.

It's it's you have to distinguish.

The experience of the consumer.

With week purchasing power so we have is essentially stagnant incomes so when you have stagnant incomes.

It feels like you have less purchasing power you can always afford less.

But inflation is a generalized price rise in prices throughout the economy including by the way wages -- you don't get any.

Run away spiral inflation when you have a really you know hurting labor market when you have.

Really deep structural problems in the in the in the employment situation -- I think that's why the Fed is willing to go as far as it has because it doesn't really see.

A massive inflation problem on the her best.

I think the Fed doesn't flu -- I think in the Fed doesn't -- -- -- school close if the Fed big.

I think inflation would be the talk of lunch.

Well you know I think you know and the point that they would make -- I think it's fair to a certain extent is that.

We know we look at the price is a very visible goods and actually New York fed president got.

Bill Dudley got in trouble for saying well I've had prices are coming down of course that doesn't help -- most people who can't even afford to buy gas in.

And then -- food on the table the.

Frank let Larry is coming down -- did He say that.

Let's ask him president for our is coming down to did He say that as well no He didn't He didn't mention that -- But you know but if you look at broadly in the economy you know for instance housing is it is a massive.

Factor in keeping prices down because you know one of the problems we have right now is -- the housing market is the precedent for prices are not rising so.

I don't I don't actually see a big inflationary threat in the near term I think the bigger the bigger risk there are so we have to focus on.

Is that this unemployment problem is not just with us for now the worse it gets the longer it's gonna take to -- And so you know you your prior guess is talking about.

Cut -- and balance and I think there's you know there's two ways of looking at it I mean there's a long term.

Discussion about the need to to bring down the deficit but at the same time.

-- any any economists both on the left or the right we'll tell you that.

Cutting spending.

-- to drastically lower levels during.

Potentially recessionary period is not a very good idea you cannot -- I tyranny.

You don't think I'm sitting -- -- not think.

And I'm gonna tell you that if we increase our debt again the market gaining go to the toilet the -- -- have to come back we're gonna have to talk more about that pick your your great because that's.

Faith seriously they did it got that a Reuters economic greater good.

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