Robert Shiller: Double-Dip Recession Is Still Very Possible

We Went A Little Overboard

Double-Dip Recession

The economy still hasn’t escaped the possibility of a double-dip recession, says Yale economist Robert Shiller, who predicted the housing bust.

“We just went through a Great Depression scare,” he told Bloomberg.

“The Fed and the government took on extraordinary measures to prevent that,” he said. “But I think our confidence is still vulnerable.”

And confidence is the major driver of the economy, Shiller says.

He defines a double-dip recession as another downturn before the economy gets completely back to normal. “I think there’s a significant possibility of that,” Shiller said.

As for the stock and housing markets, they are still way down from their peaks, so it’s difficult to argue they’re overvalued, Shiller says.

“But we’re in this very questionable economy. So there is significant risk of further declines in both the housing and stock markets.”

Star economist Nouriel Roubini is worried about a double-dip too.

He told a recent conference that developed economies around the world will face that risk for years, thanks to exploding government debt burdens and persistent unemployment.

Meanwhile, economist Robert Reich said the United States is sliding into a double-dip recession because the labor market continues to deteriorate.

“The private sector added a measly 41,000 net new jobs in May. But at least 100,000 new jobs are needed every month just to keep up with population growth,” he recently wrote on his website. The average length of unemployment continues to increase, rising to 34.4 weeks, up from 33 weeks in April.

“Why are we having such a hard time getting free of the Great Recession? Because consumers, who constitute 70 percent of the economy, don’t have the dough,” wrote Reich, who served in three national administrations and was a secretary of labor under President Bill Clinton.

By: Dan Weil

One Response

  1. Just about every stock I own has had positive earnings reports recently, or at least earnings reports better than last year or “not as bad as expected” (laughable), so it’s got to be fear that’s driving the market down? In this case, it makes sense to be scooping up more shares of BAC, TTWO, WFMI, GE, and even C at these unbelieveable levels? I’m asking because I don’t know. Then again, does anyone know anything for certain?

    Something drove the market up so quickly before this recent “double dip”. Was it optimism? The lagging indicator “jobs” was coming back, so maybe traders were getting in out of fear they may miss the boat completely? Now that the unemployment rate seems to be stabilizing at 9.5%, do traders see this as a sign things are going to get worse?

    Jobs are bad, this is true. But companies have tightened their belts and most are here to stay. What’s your opinion about buying more stock now in big companies that are sure to survive any downturn?

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