Episode 38 - November 29, 2010 Economic Outlook: Not Good

Panel discussion on October 4, 2010 with three main stream economists' predictions for jobs in 2011 and beyond. Predictions are Pretty Bad, Very Bad, and Absolutely Catastrophic.

• Paul Krugman, of Princeton, who studies macro economics, is a recipient of the Nobel Prize for Economics. He now spends much of his time as a commentator appearing in the New York Times.


• Jan Hatzius is from Germany. He currently is Goldman Sachs′ chief US economist and is responsible for setting the firm's US economic and interest rate outlook. He was listed atop of 52 Wall Street economists in The Wall Street Journal′s economic-forecast rankings.[1]  He'll be giving us his forecast.


• Martin Feldstein is currently the George F. Baker Professor of Economics at Harvard University.  From 1982 to 1984, Feldstein served as chairman of the Council of Economic Advisers and as chief economic advisor to President Ronald Reagan.

The three economists each predict job losses in 2011 even if the economy grows by 1-2 % .  Under the predicted scenario of 1-2% economic growth, Hatzius expects unemployment will increase from 9.6% to 10% or more during 2011.  If the economy grows less than 1%, or we dip back into negative growth, back into recession, then we will see even more job losses... beyond 10%.  Hatzius thinks there's a 25-30%  possibility of a dip back into recession.

The three eonomists agreed on three factors that could lead to a down turn and possibly recession: 1) If federal, state and local governments cut funding leading to significant cuts in jobs, 2) If there is more trouble in housing, like foreclosures, this will lead a continued glut of houses on the market, which drives house prices down, and 3) if commercial real estate experiences troubles as is predicted when a lot of balloon mortgages come due in 2011 on over-priced properties bought in the early 2000s.  

The predictions are bad for all three of these key influences on recession:  "Fiscal Austerity", a fancy term for cutting government spending, is almost a certainty in Washington. The spending cuts will hit state and local government workers, private companies that work for the government and the local businesses that depend on these, like parts suppliers, office suppliers, local cafes.  Some of these people will have trouble making their mortgage payments.... can you see the chain-reaction coming?  

Krugman lays out the potential for a chain reaction that triggers another financial sector crisis. He then postulates that the Tea Party influences in Congress could mean no government bail out this time... not even one with strings attached.

Download | Duration: 00:33:34