Is Weak U.S. Economy Headed For Double-Dip Recession?

By John S. McClenahen The question persists. Most economists, nevertheless, repeatedly assert the weak U.S. economy is not headed for a double-dip recession -- as if they're believers in self-fulfilling prophecies. But every now and then the economic data -- like this week's Labor Department report on initial claims for unemployment benefits -- inject a reminder of reality. For the week ending Aug. 24, initial jobless claims rose unexpectedly to 403,000, an increase of 8,000 from the previous week's revised figure of 395,000. Economists generally had expected the most recent week's mark to be about 385,000, continuing the stability that initial jobless claims have been showing in recent weeks and suggesting that a double-dip isn't likely. Maury Harris, chief U.S. economist at UBS Warburg LLC, New York, and a person who watches initial jobless claims closely, cautiously plays down the increase in claims, contending that the recent increase in the claims' four-week moving average (393,000 now versus July's low of 381,000) is "too small to imply that growth will fall short of our second-half forecast." Harris expects GDP growth at an annual rate of 2.5% in this calendar quarter and 3% in the year's final three months. "We would need a much bigger (20,000 to 30,000) rise in claims to indicate a major change in trend," he says. "The direction of change bears watching, nonetheless." Meanwhile, the U.S. Commerce Department's Bureau of Economic Analysis has recalculated inflation-adjusted GDP for this year's second calendar quarter -- using more complete data than were available a month ago. The result, however, is the same: a weak 1.1% annual rate of growth. GDP advanced at an annual rate of 5% in the first quarter of this year.

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