Moody’s Chief Economist Mark Zandi, a staunch defender of the efficacy of the administration’s $800 billion stimulus, said that Friday’s dismal jobs report for August means the economy is “very close to a recession.”
For months now, economists and pundits have debated whether the U.S. economy is headed for another contraction. The White House has generally dismissed the notion.
As recently as mid-August, President Barack Obama told CBS: “I don't think we're in danger of another recession.”
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But after learning the economy generated zero net new jobs for the month of August, Zandi told CNBC’s Squawk Box that now he’s not so sure.
“On the expenditure side, when you add up consumption, investment, and net exports, we’re coming in at around 1 percent annualized growth for Q3 [third quarter],” Zandi said.
“On the output side, which is what this [negative jobs] number will affect, this would suggest something very close to zero or a negative number. It’s not inconceivable to get a negative [GDP growth for] Q3.”
Ever the optimist when it comes to the effectiveness of Keynesian nostrums to fix the economy, Zandi conceded: “It’s obviously very dark, and we’re very close to a recession.”
Zandi emphasized that a recession is not unavoidable at this point, however.
“For a recession to occur, businesses have to lay off workers,” Zandi said. “And I don’t think that’s what is going on. Businesses aren’t laying off workers. They’ve stopped hiring."
He said “so if they can regain confidence, and don’t lay off, we’ll get through this without stepping into an outright economic downturn. We’re very close, but we’re not there yet.”
Another economist on the program, Robert Brusca of Fact and Opinion Economics, agreed that economic contraction would not be a surprise at this point, saying: “We’re on the cusp here.”
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