Could the U.S. be headed for another recession? (part one)
Although the political rhetoric and bitter debate that led up to the eleventh-hour budget deal made late last week has finally ended, it appears that the effects of Washington’s inability to compromise will be felt by many Americans for months to come. Several economists are already predicting that the downgrade of the U.S. credit rating will lead to a second recession, and experts will likely be watching the stock market closely over the next several days after last week’s near-record 513 point drop in the Dow Jones industrial average.
In metro Atlanta, which has remained one of the hardest-hit regions of the country, the already-dismal situation will likely only deteriorate, leading to even more foreclosure and bankruptcy filings throughout the area.
An economic recession is officially defined as a “contraction of the economy,” which occurs when there is a significant loss of jobs as well as a decrease in production. Although the most recent recession ended two years ago, growth since then has been slow and often stagnant, which is why many of us feel like the recession is still ongoing.
The economy is not adding nearly enough jobs to reach a pre-recession unemployment rate, but until business confidence improves, employers will not ramp up their hiring to the necessary levels. Economists say that the ongoing “political paralysis” in Washington is a reason that business confidence remains lacking. “A bipartisan approach, based on compromise, is needed to reach a long-term plan on the debt that will restore business confidence to invest in jobs,” said Jack Markwalter, the CEO of Atlanta’s Atlantic Trust wealth management firm.
We will continue this discussion in a blog post later this week, with an analysis of the recession in Atlanta and whether it is likely to continue.
Source: Atlanta Journal-Constitution, “Recession fears grow after S&P downgrade hits fragile economy,” Henry Unger and Michael Kanell, August 8, 2011