US Heading Back Into Recession?

The economic recovery in the United States has already been very fragile. And now with more layoffs, and a high number of applications for unemployment benefits, the fear of the United States heading back into recession has gripped experts and many other people alike.

It is considered that in an economy that is doing decently, 400,000 applications for jobless benefits is the norm. When the economic recession was at its worst, this figure went up to more than 650,000, which was in March '09. Things got better and it declined at a steady pace, with July '10 seeing a low of just 427,000. But the past few weeks have been bad again. The end of last week saw the highest since last year, touching the 500,000 mark.

Economist at Capital Economics, wrote to his clients, "Today's news on the economy has been nothing but awful. The recovery is clearly slowing." Senior economist at the PNC Financial Services Group, Robert Dye said, "This is obviously a disappointing number that shows ongoing weakness in the job market. Claims showed a similar pattern in the last two recoveries, but eventually began to fall again. The current elevated level of claims is a sign that employers are reluctant to hire until the rebound is well under way. That's what happened after the 1991 and 2001 recessions, which were dubbed jobless recoveries." Ken Simonson, chief economist at the Associated General Contractors of America, said, "Highway contractors began working on stimulus projects as much as a year ago, "and now that pipeline is empty. Work on commercial projects such as office buildings, malls and hotels is - dead, dead, dead."

Private firms are letting people go for the first time in nearly a year, to tighten their budgets. Public projects are also coming to a grinding halt as stimulus money has been drying up lately. Even state and city organizations are letting people go since their budget seems to be in a crisis. To be more precise, in the month of July, private firms hired around 70,000 individuals, something quite meager, while more than 200,000 government jobs were lost.

This year, growth has slowed down considerably in the second quarter, as compared to the first quarter. Experts believe it will slow down even more in the current third quarter. All the above facts along with this, has led to the fear of the United States heading back into recession, which in turn has led to a sell-off on Wall Street by investors. And then with the weak jobs situation, consumers will not be comfortable in spending much, and this will facilitate the further slowing down of the economy. And all this finally leads to the one fear, is the US heading back into recession?