They’re a minority, but a vocal one, and they’re hovering like storm clouds over a brittle recovery.
They’re the double dippers - the politicians, economists and analysts who foresee back-to-back recessions.
Their warnings could become self-fulfilling prophecies if they frighten enough people into holding tightly onto their wallets. With consumer spending accounting for two-thirds of economic activity, anything that further rattles consumers can undercut recovery hopes.
Recent data has shown that, after growing moderately for most of the past year, the U.S. economy appears to be slowing. This was underscored by Friday’s government report that U.S. economic growth slowed to 2.4 percent from April to May, down from a revised 3.7 percent in the previous quarter. Such statistics are providing more ammunition to the double dippers.
Most mainstream economists agree the recovery road will be long and bumpy, but probably without leading into double-dip territory. But there are plenty of other voices warning of grimmer times ahead.
Nobel Prize-winning economist Paul Krugman of Princeton University argues in his New York Times columns that the U.S. already may have fallen into the early stages of a long, deep depression such as Japan’s “lost decade.” He claims that President Obama and Congress have failed to provide enough stimulus spending.
To University of Maryland business economist Peter Morici, “Signs abound that the economic recovery is faltering.” Washington-area financial adviser Randy Beeman tells listeners to his weekly radio show that chances of a double-dip recession are now about 75 percent.
Yale University economist Robert Shiller, a leading expert on the housing market and author of “Irrational Exuberance,” a 2000 book that foretold the coming crash of the tech stock bubble, sees more than a 50-50 chance of a double dip. “I actually expect it,” he says.
Former Federal Reserve Chairman Alan Greenspan told CNBC a double-dip recession can’t be ruled out. “Of course, there’s a possibility,” he said.
Are double dippers becoming recovery party poopers?
“If consumers are hearing a lot of bad economic news and they’re already scared, they might pull back some more,” said Nigel Gault, chief U.S. economist for IHS Global Insight.
There are 15 million people unemployed. “Employers might be willing to hire more if consumer spending was doing better,” Mr. Gault said. “But then maybe consumer spending won’t start doing better until employers start to hire.”
A new analysis by the Rockefeller Foundation and Yale University found American households in the most precarious financial situation in a quarter-century.
“There is a clear long-term upward trend in the economic insecurity of American families,” said Yale professor Jacob Hacker, who led the study. “It’s an issue squarely confronting the American middle class.”
Consumer fears of a new recession, before the nation heals from the last one, are being fed from both sides of the political spectrum. The fact that it’s midterm election season doesn’t help.