Issue of the week: Why the recovery is stalling

Analysts are afraid the economy may be heading into a recession again. Neither the public nor private sectors are hiring and the old consumer-based economy may never return.

“Double dip, here we come,” said Colin Barr in Fortune.com. Anemic growth, plummeting consumer confidence, and the glacial pace of job creation has many analysts fearing we could be heading into recession again, even though many jobless Americans never noticed that the last one formally ended two years ago. Gary Shilling, “one of the few people who saw the housing bust and financial crisis coming years before they happened,” predicts that the next downturn will occur in 2012, said Howard Gold in MarketWatch.com. One of the reasons for his pessimism is that the jobs picture is “nowhere near what we’ve had in past recoveries.” When employers hire at all, “it’s often on a part-time or temporary basis.”

One big difference this time is the lack of government hiring, which tends to “blunt the bleeding of the private sector” during downturns, said Morgan Housel in TheMotleyFool.com. Since 2010, the public sector has cut nearly half a million jobs, particularly at the state and local levels, because of “plunging tax receipts.” Add those job losses to the steep declines in manufacturing, construction, and retail, and you can see why “most respected economists don’t see employment hitting pre-recession levels until 2014 at the earliest.”

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