Economists Divided on Direction of Economy, Inflation
Friday, July 11, 2008
With the second half of the year just beginning, economists are questioning if the worst of the U.S. downturn is already over, or whether uncertainty about rising prices spells more gloom and doom for the economy.
Thursday's BLS nonfarm payrolls report for June showed the sixth month of consecutive declines in the U.S. economy, totalling 438k net losses this year and indicating further deterioration is to come. However, economists say it is not job losses that are the major concern heading into the third quarter, but rising prices.
While there is pressure for the Fed to combat inflation, the central bank remains constrained not only by broad-based, anemic growth, but by the fact that soaring energy prices are caused by increased global demand rather than by U.S. consumers.
Charmaine Buskas, senior economics strategist at TD Securities, said the first half of 2008 "didn't see as much fallout as we would have expected," noting that the downswing in jobs was much weaker than in previous downturns. She noted job losses have yet to exceed 88k per month, whereas previous downturns have reported monthly declines of more than 100k and even as many as 200k, which "suggests recent deterioration has been tame."
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Posted byAdmin at 1:03 PM
Labels: Economy, inflation, mortgage news