Federal Reserve Chairman Ben Bernanke wrote his Ph.D. thesis on the uncertainty issue 32 years ago, as he reminded Congress the other day. "There’s certainly uncertainty about regulation… but there’s also uncertainty about whether this is a durable recovery," he said. "People don’t know whether to invest or to hire because they don’t know … whether the recovery is going to continue. So part of what we can do [is] address the regulatory, trade, tax environment, [and] absolutely [the] fiscal environment. We also want to do whatever we can to make the economy grow faster and make people more confident."
You could call it the un-recovery…When The WSJ took its monthly snapshot of forecasters in February, they were upbeat. Encouraged by the economy’s momentum at the end of 2010, they predicted the U.S. would grow at an annual rate of 3.6% in the first quarter, 3.4% in the second and third and 3.5% in the fourth.Many economists have ratcheted down their growth forecasts for the U.S. economy in 2011 from predictions made just a few months ago. Three hypotheses from the Journal’s David Wessel on what derailed the recovery.That was hardly the burst of growth that usually follows a deep recession, but it would have been enough to bring down unemployment gradually.The forecasters were wrong: The U.S. grew at a disappointing 1.9% pace in the first quarter. The government likely will report next week that the second quarter was no better, perhaps as slow as 1.4% or 1.5%. The latest Journal survey finds that the average forecast for the third and fourth quarters has been marked down to 3.1% and that forecasters see growth below 3% in the first half of 2012.Last week, Goldman Sachs economists said renewed recession is "not our forecast, but clearly a possibility given the recent numbers." Gulp!
By David Wessel, July 21, 2011 WSJ