Nouriel Roubini, the New York University professor, nicknamed "Dr. Doom" for predicting disaster before the credit crisis, has again turned very negative on the U.S. economic recovery. There was a time, for a few months, when he thought the recession would end and modest growth would return. But whatever positive views Roubini may have had seem to have completely disappeared. During an address at the annual summit of business and political leaders in Davos, Switzerland, he said the economy was once again under dark clouds."The headline number will look large and big, but actually when you dissect it, it's very dismal and poor," Roubini said in a Jan. 30 Bloomberg Television interview referring to the initial measure of 5.7% economic growth in the U.S. for the fourth quarter. He added, "I think we are in trouble." He expressed his concern that the robust increase in the fourth quarter was due largely to inventory replenishment. He also predicts that GDP growth would slow to 1.5% in the second half as the impact of the stimulus package begins to dissipate.
Fortunately, Roubini hasn't always been right in his predictions: In an August 2008 interview with Barron's, he said as many as 1,400 U.S. banks could fail. That number has been closer to 200, and it doesn't appear that the Federal Deposit Insurance Corp. and state authorities will have to shutter anywhere near the number he predicted.
And as recently as November, Roubini's views on the recession were somewhat positive, with BusinessWeek reporting, "Roubini remarked there may be a light at the end of the tunnel, and government efforts around the world have likely allowed a 'bottoming-out.'"
Misery Has Company
However, he's not alone in his recent analysis that foresees a second-half slowdown in U.S. GDP. Other economists are concerned that 10% unemployment makes a long-term recovery unlikely. Still others believe that bank lending is too low for small businesses to get the credit they need for hiring and expansion. Even the nonpartisan Congressional Budget Office doesn't think the 5.7% growth rate is sustainable. It recently said the expansion in the U.S. would remain between 2% and 3% for the balance of the year.
The predictions of uninterrupted growth that became popular toward the end of last year seem to be fading, as the reasons for a new slowdown become more prevalent in the forecasts of economists and government officials.
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