Sunday, November 7, 2010

Double-Dip Recession

Is the economy going into a second recession? The evidence suggests the economy will not reenter into another recession.

The biggest concern is the high levels of long-term unemployment. I don't see this causing another significant slowdown in the short-run. Instead I think the economy is going to adjust to a new level of economic growth. Instead of growing at 3% we'll grow at a 2% average. I view this as more of a structural problem. Households will continue to save, the natural rate of unemployment will increase, but the economy will grow.

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