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What Does Double Dip Recession Mean? When gross domestic product (GDP) growth slides back to negative after a quarter or two of positive growth. A double-dip recession refers to a recession followed by a short-lived recovery, followed by another recession.
Investopedia Says Investopedia explains Double Dip Recession
The causes for a double-dip recession vary but often include a slowdown in the demand for goods and services because of layoffs and spending cutbacks from the previous downturn. A double-dip (or even triple-dip) is a worst-case scenario. Fear that the economy will move back into a deeper and longer recession makes recovery even more difficult.
Former Federal Reserve chairman Alan Greenspan said the slowing economic recovery in the U.S. feels like a "quasi-recession," and the economy might contract again if home prices decline.
"We're in a pause in a recovery, a modest recovery, but a pause in the modest recovery feels like a quasi-recession," Greenspan said on NBC's Meet the Press.
Asked if another economic contraction, a so-called double dip, was possible, Greenspan said, "It is possible if home prices go down. Home prices, as best we can judge, have really flattened out in the last year."
Slowing economic growth, and a decline in housing activity following the expiration of a government tax credit, have raised fears that the economy could return to a recession before completing its recovery from the worst downturn since the 1930s.
The former U.S. central bank chairman said that most economists expect "a small dip" in home prices.
The National Association of Realtors reported that the pace of home sales fell in June for a second month.
Homes are selling at an annual rate of 5.37 million, and the group's chief economist Lawrence Yun said transactions will be "very low" in coming months.
"If home prices stay stable, then I think we will skirt the worst of the housing problem," Greenspan said. "But right under this current price level, mainly 5, 7 or 8% below, is a very large block of mortgages, which are underwater, so to speak, or could be underwater. And that would induce a major increase in foreclosures, foreclosures would feed on the weakness in prices, and it would create a problem."
Home prices in 20 cities rose by 4.6% in May, according to a report from S&P/Case-Shiller last week. Because of the index's lag in reporting, the extent to which home prices may slacken in June and July is not yet determined.
Greenspan's successor, Ben Bernanke, told Congress last month that the economic outlook is "unusually uncertain." Bernanke and his colleagues on the Federal Open Market Committee will meet Aug. 10 in Washington.
Last week, the Commerce Department reported that the recovery slowed in the second quarter this year. The economy grew at a 2.4% pace, following growth of 3.7% in the first quarter.
Jobless claims jump to 3-month high...
NEW YORK (CNNMoney.com) -- The number of Americans filing for initial unemployment insurance jumped last week to the highest level in 3 months, the government said Thursday.
There were 479,000 initial jobless claims filed in the week ended July 31, up 19,000 from a upwardly revised 460,000 the previous week, the Labor Department said. The weekly figure is the highest since the week ended April 10, when 480,000 initial claims were filed.
The number of claims was higher than the 455,000 claims expected in a consensus estimate of economists surveyed by Briefing.com.
The 4-week moving average of initial claims, which is calculated to smooth out volatility, was 458,500, up 5,250 from the previous week's upwardly revised average of 453,250.
"The job market is pretty muted," said Doug Roberts, chief investment strategist at Channel Capital Research. "It's not getting much worse, but it's not getting any better either."
Roberts said the monthly employment report will provide a clearer picture of trends in the labor market, but it's clear that a long road still lies ahead of a jobs recovery.
"The government has been driving the improvements we've seen in unemployment so far, so as soon as it stops spending, we'll be back to where we were before," Roberts said.
As census jobs and the stimulus continue to fade, Roberts said jobless claims will increase.
Continuing claims: The government said 4,537,000 people filed continuing claims in the week ended July 24, the most recent data available. That's down 34,000 from the preceding week's upwardly revised 4,571,000 claims.
Economists surveyed by Briefing.com were looking for 4,530,000 ongoing claims.
The 4-week moving average for ongoing claims climbed by 25,750 to 4,575,500 from the preceding week's upwardly revised 4,549,750.
State by state: Jobless claims in 19 states declined by more than 1,000 in the week ended July 24, the most recent state data available. Claims in California dropped the most, by 19,107, which the state attributed to fewer layoffs in the service industries.
By mid-1930, interest rates had dropped to low levels, but expected deflation and the reluctance of people to add new debt by borrowing, meant that consumer spending and investment were depressed. In May 1930, automobile sales had declined to below the levels of 1928. Prices in general began to decline, although wages held steady in 1930; but then a deflationary spiral started in 1931. Conditions were worse in farming areas, where commodity prices plunged, and in mining and logging areas, where unemployment was high and there were few other jobs. The decline in the US economy was the factor that pulled down most other countries at first, then internal weaknesses or strengths in each country made conditions worse or better. Frantic attempts to shore up the economies of individual nations through protectionist policies, such as the 1930 U.S. Smoot–Hawley Tariff Act and retaliatory tariffs in other countries, exacerbated the collapse in global trade. By late 1930, a steady decline in the world economy had set, which did not reach bottom until 1933.