Los Angeles : Despite the huge bailout efforts now underway, the US economy is unlikely to recover any time soon and “probably will continue to sputter and threaten to stall for years to come,” according to a report Monday.
“The damage done by plunging house and stock prices, the failure of other major economies to be independent sources of growth and hidden weaknesses in America’s past performance have crippled nearly every actor in the nation’s economic drama,” the Los Angeles Times noted.
“None – save perhaps the government – retains the power to push the economy back to peeds it regularly achieved during much of the last generation,” the paper quoted economists as saying.
As a result, the US economy that once averaged three percent or better annual growth would be lucky to grow two percent a year during the entirety of the new president’s term, the paper said in an analysis.
“That is going to feel like stagnation” to most people, John Lonski, chief economist at Moody’s Investors Service, was quoted as saying.
For Stephen S. Roach, chairman of Morgan Stanley Asia, “It will be a long time before the world experiences anything more than anemic recovery.”
“We’re in a post-bubble global recession, and post-bubble recessions are lethal for growth,” the papaer quoted Roach as saying.
With the economy in limbo, unemployment could be worse than now by the time president-elect Barack Obama’s first term ends, the paper said.
The unemployment rate at the end of Obama’s first term would be one-half to one full percentage point above where it was before the start of the recession, said the paper, quoting a recent study by Christina Romer, Obama’s nominee to chair the Council of Economic Advisors, and Vice President-elect Joe Biden’s chief economist, Jared Bernstein.
That would mean as many as 1.5 million additional jobs would be lost, the paper said.
The report cited declining US consumption as one of the major factor leading to the continuing poor performance of the economy.
“As the elaborate superstructure of easy credit began to pop rivets, consumers found themselves caught dangerously short,” said the paper. “They have reacted by drastically cutting back on purchases, particularly those that are discretionary.”
Although US consumers constitute only about 4.5 percent of the global population, they bought more than $10 trillion worth of goods and services last year, according to the report.