US economy muddles through the gray – odds of a new downturn more than 50%



Chances are high that the Unites States of America will lapse into yet another economic downturn during 2012-2013 as the economy has been facing a number of roadblocks that could possibly derail the already sluggish growth. The consensus among economists about the probability of the double-dip recession rose to 35% in November from 25% in August, 2011. The last time that economists predicted a similar recession was 4 years ago in September 2007 and soon after Lehman and Brothers collapsed, all the Western economies had a backslide into a grave depression that was known as the GFC.

The US economy is dangerously close to stall speed and a slight shock could derail the cycle. There’s no buffer and a poll of 80 economists including Mark Zandi, chief economist at Moody\’s Analytics,established that the respondents had slashed their growth predictions, although growth was anticipated to pick up in the second quarter after a murky first quarter. The economy developed at an annualized rate of 1% in the Q2 of 2011 and the financial experts saw it improving modestly for the rest of the 2011 and have showed positive signs of stronger growth in 2012.

Does this suggest a recovery that is still vulnerable to fiscal jolts? The chief economist of the Fannie Mae, Doug Duncan, feels that there’s 40-50% chance of the US slipping into yet another financial fiasco and the main reason would be lack of jobs and the national unemployment rate remaining at too high a level.

The ultimate challenge of the US economy is the job creation

On a more domestic level the world’s biggest economy faces frail consumer confidence, jittery investment markets and stubbornly high unemployment levels. 2012 is expected to start off with a 2% growth before the rate picks up to 2.5% by the Q2 of the same year. There are also some positive rumors that the new ‘jobs bill’ passed by Obama will help the economy regain momentum. If this bill is passed, it may have the potential to boost the 2012 growth to the 3.4-3.7% range, thereby rejuvenating the confidence of the consumers in the US economy.

The skeptical result of the lawmaker’s decision to handle the economy was eroded by the discordant debates over the raising of the debt ceiling and this led to the downgrade of the pristine US credit rating by the S&P. However, despite all efforts, there is still hovering uncertainty about the ultimate outcome as the Republicans and Obama fight the major battle of the year – unemployment.

The chances of another financial fiasco – what it means for education?

Everywhere we look there is news about the second recession and widespread effects of the economic downturn across all the sectors. The education industry is feeling the after-effects sharply, whether you’re a student, a teacher, a lecturer or even a university. If you’re a university boss performing your job in a recession, what’s the first thing that you would do when you’re falling short of money? You would certainly combat the credit crunch by bleeding money from the students. Since the last recession, it took a tragedy experience to form a more positive and optimistic attitude towards education as the rate of population started increasing and the demand for education also. In fact, the Obama Administration feels that a 30% college graduation rate is certainly too low for America and he also feels that the total pay for the college graduates is disproportionately higher than non-graduates and this gap has continued to widen throughout the years.

As per the Bureau of Labor Statistics, 70% of high school graduates had enrolled in college for 2010 and this figure was up from 65% in 2009. 2/3rds of the students who enroll in degree programs are not able to complete them due to the credit crunch that they’re going through. Most graduates pass out with debt apart from their graduation degree. As the labor market is not supporting them financially, an increasingly large number of students are drowning deeper into the vicious cycle of debt.

Odds are perhaps more than 50% that we will experience the hassles of going through another fiscal catastrophe somewhere early in 2012 as the international odds of recession are more imprecisely estimated. However, the prudence of the economists suggests that the fragile state of the US economy couldn’t easily withstand turbulence across the Atlantic and that a European debt default may soon sink the US into another recession. If America can combat the storm throughout 2012, chances are high that the menace will retreat rapidly in 2013.

Author Bio: John is a contemporary financial writer and analyst who love to offer his opinion about the current financial events He mainly covers articles on debt, student loan debt and the impact of recession on the economy. To know more on debt, you may visit