Analysts Increasingly Pessimistic About Economic Recovery
Forecasters are increasingly reining in their expectations for the United States' economic performance, suggesting that the country will face many more months of anemic growth before the recovery takes hold.
Weak expansion and bloated unemployment rates, as well as a debt crisis in Europe and a climate of uncertainty aggravated by partisan gridlock in Washington, have caused a growing number of analysts to issue discouraging projections.
Moody's Analytics, a sister company of the credit rating agency Moody's Investors Service, is the latest group to register its pessimism. On Monday, Moody's lowered its growth outlook for the U.S. economy, warning in its report that the odds of a double-dip recession are already one in three -- and that those odds are "rising with each 100-point drop in the Dow," a reference to the market volatility seen last week.
"The near-term economic outlook is significantly weaker than it was just a month ago," Moody's chief economist Mark Zandi wrote in the report.
Moody's lowering its outlook has been taken as a signal that the agency may be considering a downgrade of the country's sovereign credit rating. A similar downgrade from Standard & Poor's sent shock waves through the stock market last week, with the Dow rising and falling hundreds of points from day to day.
In spite of the Moody's announcement, markets had a strong performance on Monday, with the Dow finishing up about 214 points on the day.
Other groups have made predictions similar to Moody's recently. Earlier this month, Goldman Sachs also put the odds of a new recession at one in three, and said that the national unemployment rate was likely to rise to 9.25 percent by the end of 2012.
A group of 39 economists, recently polled by USA Today, offered a slightly less grim picture for the near term -- including 8.8 percent unemployment by August 2012 -- but still expected a prolonged period of slow growth.
Likewise, last week, Wells Fargo published a forecast for "moderate, subpar growth accompanied by rising inflation pressures."
The Wells Fargo report characterized America's situation as a "MacGyver economy," because like the resourceful detective, "we must make do with what we have -- not what we would like to have."
One note of reassurance has come from the credit rating agency Fitch Ratings, which recently said that it plans to maintain its AAA rating for the United States' credit, and that its outlook on the country's rating is stable.
Standard & Poor's became the first major agency to give America a rating of less than triple-A when it downgraded the sovereign debt rating from AAA to AA+ earlier this month. Moody's, like Fitch, has not revised its triple-A rating for America's credit.
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The Huffington Post Alexander Eichler First Posted: 08/16/11 02:04 PM ET Updated: 10/16/11 06:12 AM ET