On the same day Moody’s declared the prospects for economic growth and job creation to have “diminished substantially,” President Obama failed to use his bus tour to detail a plan to grow the economy and create jobs. Expect more of the same empty rhetoric from the President’s no-jobs bus tour in the days ahead.
Moody’s Lowers Economic Growth Outlook
The Wall Street Journal
August 15, 2011
Moody’s Investors Services said its near-term outlook for the U.S. economy has fallen significantly in the past month in the wake of the debate over the U.S. debt ceiling and the downgrade by rival credit-rating company Standard & Poor’s of the nation’s credit ratings.
Moody’s now expects real gross domestic product to increase at an annualized rate of about 2% in the second half of this year and just over 3% next year, compared with its estimate a month ago for growth of 3.5% for the second half of this year and through 2012.
The firm attributes most of the expected decline to a loss of business, investor and consumer confidence, noting the economy’s improving fundamentals such as the strengthening of business’s balance sheets and consumers’ strides in cutting household debt.
The credit-rating company also said it thinks the odds of a renewed recession over the next 12 months — now at 1 in 3 — will increase if stock prices continue to fall. Moody’s maintains that the odds of a renewed recession rise with each 100-point drop in the Dow Jones Industrial Average. While Moody’s expects the economic recovery will continue, prospects for economic growth and job creation have “diminished substantially.”
Though the U.S. economic recovery looked healthy at the beginning of the year, a series of events have hurt business, consumer and investor confidence, Moody’s said. These include surging prices for food and gasoline, natural disasters in Japan, Europe’s debt crisis and, most recently, the U.S. debt woes.
The economy needs to grow 2.5% to 3% a year to create jobs fast enough to keep the unemployment rate stable, Moody’s said. However, Moody’s said it doesn’t think this will happen soon.