The economy is still growing, but just barely. The latest wave of downbeat economic data, including Friday’s report on gross domestic product, has renewed fears that we could be headed for the second half of a “double dip” recession.
It is even possible that the apparent economic recovery is a mirage, and that the recession that began in December 2007 never really ended.
Increasingly it seems that the unprecedented measures taken in 2008 and 2009 to revive the economy are not working because the recession is unlike any this country has seen in the past 60 years.
“After all the monetary, fiscal and bailout stimulus, the economy should be roaring ahead,” Gluskin Sheff chief economist David Rosenberg wrote in a recent note to clients. The economy’s sluggish performance shows that “this is not actually a traditional recession at all,” he said.
In a widely anticipated speech Friday, Federal Reserve Chairman Ben Bernanke tried to allay fears that the central bank is out of “bullets” and unable to do anything more to revive the economy.
He said that he expects growth to pick up next year and that the central bank is considering buying more securities if needed to ensure that interest rates stay low for an extended period. And he said the fed could encourage more lending by cutting interest payments to banks on the cash they keep in reserves.
“The issue at this stage is not whether we have the tools to help support economic activity and guard against disinflation. We do,” he said at an annual gathering of economists and central bankers from around the world in Jackson Hole, Wyo.
Rather, he said, the Fed is weighing whether the costs and benefits of those measures justify using them.
But Bernanke acknowledged the Fed can’t do all the heavy lifting.
“Central bankers alone cannot solve the world’s economic problems,” he said.