Brace Yourself for Even Worse 2nd Recession

Could devastate a still-ailing economy, writes Catherine Rampell
By Matt Cantor,  Newser Staff
Posted Aug 8, 2011 8:33 AM CDT
Second Phase of Double-Dip Recession Could Be Even Worse
In this Aug. 4, 2011 photo,a job seeker speaks with a recruiter at a job fair in Arlington, Va.   (AP Photo/Jose Luis Magana)

Economists say we could be headed for a second recession—and if they’re right, it’s poised to be even more devastating than the first, writes Catherine Rampell in the New York Times. That’s because the starting point for the second dip would be our current weak economy, and this time, policymakers have little room to fix things. Consumers don't have much fat to cut, either—they did that already—meaning families would have to "cut from the bone."

Other signs round two would be a doozy: Consumer spending hasn’t grown; industrial production is down 8% compared to December 2007; and while the civilian working-age population has grown about 3% since 2007, there are 5% fewer jobs for it. Interest rates can’t go lower than their current zero, and Washington lacks the financial and political means for another stimulus. Finally, "and perhaps most worrisome," is the fact that the economy is smaller now than it was at the beginning of the recession. The only good news: Corporate profits have hit record highs, and the cash in corporations' coffers could "act as a buffer to layoffs if demand drops." (More double-dip recession stories.)

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