The U.S. economy risks falling back into recession if the government doesn’t adopt a new fiscal-stimulus package to create jobs, says Yale economist Robert Shiller.
The risk is greater than 50 percent, he told MarketWatch.
Economists have largely focused on monetary policy since the Federal Reserve’s recent decision to avoid shrinking its balance sheet.
But the Fed, already having reduced interest rates to near zero, can’t revive the economy by itself, Shiller says.
"Beyond the Fed, I'd like to see the government take a renewed stimulus package focused on creating jobs and on activities that involve a lot of people," Shiller told MarketWatch.
Despite last year’s $787 billion fiscal stimulus package, unemployment remains at 9.5 percent. And economic growth slumped to 2.4 percent in the second quarter from 3.7 percent in the first.
"There is significant likelihood of (a second recession) if the government doesn't do something,” Shiller said. “I'm worried unemployment is not going to self-correct."
The program doesn’t have to be expensive, Shiller says. In a recent New York Times column, he noted that hiring a million people at $30,000 per person would cost $30 billion, only 0.2 percent of the national debt.
Others are worried about the labor market too.
“Simply put, job growth in the private sector hasn’t improved as we would’ve expected,” John Silvia, chief economist at Wells Fargo Securities, told Bloomberg.
Still, he’s not talking double dip. “The consumer continues to contribute to growth but at a subpar pace.”
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