Leave it to Paul Krugman to rain on everyone's parade
In a speech Wednesday in Slovenia, the New York Times columnist offered a dire assessment of the U.S. economy, predicting that unemployment will peak in 2011 only after a "slow and painful" recovery from the worst economic crisis since the Great Depression, according to Reuters. Most economists have argued that the current unemployment rate of 9.7 percent, a 26-year high, will hit double digits before the end of the year, underscoring fears of a jobless recovery.
Reuters quotes Krugman as saying that the acute phase of the global financial crisis was but that the recovery will feel like a "continuing recession." The Princeton University professor even raised the specter of a "double dip" recession. Last month, Nouriel Roubini, the real Dr. Doom, warned that the risk of a double dip recession was increasing because oil, energy and food prices are now rising faster than fundamentals warrant, and could be driven higher. Krugman argues that there was a "real possibility" of such an outcome.
Even as the economy improves, many people won't notice much of a difference in their daily lives. As Krugman notes, recoveries from recent recessions have been weak. He expects the global job market to worsen well into 2011. Other forecasts are also downbeat.
In its recent outlook, the IMF noted in its 2010 outlook that the economy was showing signs of improvement but that "vulnerabilities remain and complacency must be avoided." The IMF argued that financial instability remains the main risk to recovery.
At this point, Krugman and his brethren are an antidote to the unbridled optimism coming from Wall Street.