Moody’s Analytics U.S. Macro Outlook: Slow U.S. Economic Growth Vulnerable to New Downturn

The U.S. economy is growing, but at a slow pace that leaves it vulnerable to a new downturn, writes Moody’s Analytics’ Chief Economist Mark Zandi in his report, "Macro Outlook: Barely Staying Afloat.” Zandi notes that the macroeconomic outlook remains tenuous, with the probability that the U.S. will see a recession over the next 6 to 12 months at 40%.

Zandi cites the ongoing European debt crisis, the U.S. foreclosure crisis and Washington’s rift over fiscal policy as the principal threats to economic recovery.

"Policymakers on both sides of the Atlantic must intervene. In our baseline outlook, the U.S. will avoid recession only because we expect policymakers to act in the next few months,” Zandi writes.

For the first time in several months, the near-term macroeconomic outlook has not changed appreciably. Real GDP is expected to grow at an annual pace near 2% during the second half of this year and 2.5% in 2012. The economy is expected to create just enough jobs to ensure that unemployment remains close to 9% through the end of 2012.

Zandi notes that in the U.S. job creation – discounting the effects of weather, the Verizon strike and other temporary factors – was close to 75,000 per month. The country needs to add at least 125,000 jobs per month simply to keep the unemployment rate stable. "Failing to meet even that target is especially frustrating with unemployment above 9% and underemployment – including discouraged workers and those working part-time for economic reasons – at 16%,” he writes.

For more information, or to view the report, please visit www.economy.com.

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