By Bob Willis
Oct. 31 (Bloomberg) -- Nobel Prize-winning economist Joseph E. Stiglitz said the U.S. recession is “nowhere near” an end and the economy’s third-quarter growth rate of 3.5 percent, the first expansion in more than a year, won’t carry into 2010.
While this week’s figures on gross domestic product are “very good,” the numbers would be “miserable” without stimulus measures enacted by the Obama administration, Stiglitz said today at a forum in Shanghai. He urged the U.S. and other countries not to pull back on efforts to shore up economies.
“When we look at if workers can get jobs, if they can work full time, if businesses are able to sell goods they produce, in those terms, we are nowhere near the end of recession” in the U.S., said Stiglitz, 66, the former chief economist at the World Bank. The U.S. job market is still “in very bad shape.”
Federal assistance to the housing and auto industries helped propel growth in the July-September quarter. President Barack Obama, in his weekly radio address to the nation, today called the Oct. 29 report on GDP a “good sign” and said an expanding economy is the first step to job creation.
While most economists estimate the recession has ended, the National Bureau of Economic Research is responsible for determining when contractions begin and end. The Cambridge, Massachusetts, organization usually makes its recession pronouncement as long as a year and a half after the fact. The group defines a recession as a “significant” decrease in activity over a sustained period of time. The declines it measures would be visible in gross domestic product, payrolls, production, sales and incomes.
Surging Unemployment
The U.S. unemployment rate reached a 26-year high of 9.8 percent in September and economists project it will exceed 10 percent by early 2010.
“The unemployment rate is likely to go up,” Stiglitz told reporters two days earlier in Beijing. “Growth won’t be fast enough to bring down the unemployment rate.”
Stiglitz, a professor of economics at Columbia University in New York, said the growth rate of 3 percent to 3.5 percent needed to create enough jobs for new U.S. labor market entrants was unlikely to be sustained into next year.
It is too early for the U.S. and other countries to begin easing stimulus measures put in place a year ago to avert a financial market meltdown, Stiglitz said.
“For the world as a whole, it’s premature to think about exiting stimulus,” he said today in Shanghai. Stiglitz became a Nobel laureate in 2001, sharing the prize with George A. Akerlof and A. Michael Spence, both of the U.S., for their analysis of how markets function when buyers and sellers have different information about a product or service.
Curbing Stimulus
Around the world, central banks are paring emergency measures taken at the height of the financial crisis. The record $1.4 trillion budget deficit limits Obama’s options for more aid, Obama’s options for more aid, while Federal Reserve officials try to convince investors that the central bank will exit emergency programs in time to prevent a pickup in inflation.
Japan’s central bank said Oct. 30 that it will stop buying corporate debt at the end of the year. Australia this month became the first Group of 20 nation to raise rates since the height of the crisis, and Norway’s central bank followed.
In China, the State Council pledged Oct. 21 to continue monetary and fiscal stimulus even after the economy exceeded officials’ expectations for the first nine months of the year. Growth is likely to top the government’s 8 percent target for 2009, the central bank said this week.
U.S. economy’s third-quarter growth at a 3.5 percent annual rate followed four quarters of contraction that marked the worst performance in seven decades.
Obama, in his remarks, said “economic growth is no substitute for job growth.”
To contact the reporters on this story: Bob Willis in Washington bwillis@bloomberg.net;
0 comments:
Post a Comment