More economists believe a recession is probable in 2008. A February survey of economists by the National Association for Business Economics shows that only a slim majority of those surveyed see the U.S. skirting an economic downturn this year. In February, 45% of the respondents believed the economy had already begun to contract or would do so this year. The number who believed a recession was imminent rose from 40% in November and 25% in September.
This week’s data will provide more clarity on the recession outlook. In particular, the February employment data is most important. The economy can’t grow if businesses stop hiring. In January, nonfarm payrolls shrunk by 17,000 workers, the first monthly dip since 2003. Economy watchers expect businesses and the government to add a total of 50,000 jobs in February. But even at that pace, the jobless rate will keep rising. More people out looking for a job also reduces the pressure on businesses to fork out large pay raises.
Many homeowners are watching property values fall and stock prices have also dropped this year. That makes people feel less wealthy, and places more emphasis on gains in wages and salaries to drive consumer spending.
However, businesses can’t be expected to add workers if they see demand falling. Economists will get a better understanding of what employers are confronting with the February business activity reports from the Institute for Supply Management and the Federal Reserve’s Beige Book report on current economic conditions. In January, the service sector report raised a big red flag when it unexpectedly fell below 50%, indicating a decline in activity. If the February figures don’t rebound, it would be a real cause for concern.
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Topic: Vital Signs (Read 5286 times)