Thursday, August 24, 2006

Feldstein: Slow Growth, Not Recession

by Calculated Risk on 8/24/2006 10:05:00 PM

Bloomberg reports: Harvard's Feldstein Says U.S. Should Dodge Recession

The U.S. economy should dodge recession, said Harvard Professor Martin Feldstein, who heads the organization that dates business cycles.

"If I had to make a likely guess, I would say slow growth, but not recession," Feldstein said ...
Feldstein, who chairs the National Bureau of Economic Research, said a recession could occur if households made a "decision to start saving again" rather than keep spending as the housing market fades. ...

"Household savings is now negative and that was driven by the fact that house wealth was up and that mortgage refinancing was very, very appealing," Feldstein said. "People took that money and they went and spent a lot of it. So if that goes into reverse, that could tip the economy."

Still, he noted a "lot of positives that could keep the economy moving along," among them a moderation in the trade deficit.

As chairman of Cambridge, Massachusetts-based NBER, Feldstein is a member of its Business Cycle Dating Committee.
That is the positive outlook: slow growth, but no recession. Still, Feldstein is clearly concerned about the loss of simulus from the "Home ATM".

For the pessimistic view, see Krugman: Housing Gets Ugly (pay). For excerpts see Economist's View.