Is the U.S. Headed for Double Dip or Did It Just Hit a Bump?

At this point, there's little question that the U.S. economy has taken a step back. We now have enough indicators from May to see that it was an ugly month that doesn't fit in with a recovery narrative. Job growth was too anemic to keep up with population growth; retail sales began to fall; and home prices continued to drop as sales remain very low -- to name just some of the bad news we've seen. Is this just a temporary rough patch or can we expect to see layoffs resume and GDP decline as recession returns?

Bill McBride at Calculated Risk addresses this question today. He does a great job of laying out what has caused the current setback and discusses whether these factors are temporary or lasting. But it's also important to think about what obstacles the U.S. economy faces going forward. Here are several ongoing drags he sees:

• Less Federal stimulus spending in 2011. The American Recovery and Reinvestment Act of 2009 (ARRA) is winding down, and will be a drag on GDP growth.

• The ongoing cuts in state and local spending.

• The festering financial crisis in Europe. Although the direct impact on U.S. trade would be minimal, there could be a significant financial impact on the U.S. if Greece (and other countries) default.

• The slowdown in China impacting U.S. exports.

• Another downturn in house prices.

Ultimately, he says that we've got to wait a few more months to see how a few factors evolve, particularly commodity prices. But for now, he appears to believe that it's too soon to say that a double dip inevitable.

Read the full story at Calculated Risk.

Presented by

Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.

Google Street View, Transformed Into a Tiny Planet

A 360-degree tour of our world, made entirely from Google's panoramas

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

Google Street View, Transformed Into a Tiny Planet

A 360-degree tour of our world, made entirely from Google's panoramas

Video

The 86-Year-Old Farmer Who Won't Quit

A filmmaker returns to his hometown to profile the patriarch of a family farm

Video

Riding Unicycles in a Cave

"If you fall down and break your leg, there's no way out."

Video

Carrot: A Pitch-Perfect Satire of Tech

"It's not just a vegetable. It's what a vegetable should be."

Video

The Benefits of Living Alone on a Mountain

"You really have to love solitary time by yourself."

More in Business

Just In