Throw cold water on reports that bearish economist
Nouriel Roubini is turning into an optimist.
Mr. Roubini, whose warnings of a housing and credit collapse were eerily accurate, is standing by his forecast that there won’t be any economic growth before the end of 2009.
“It has been widely reported today that I have stated that the recession will be over this year and that I have improved my economic outlook,” Mr. Roubini, a professor of economics at New York University, said in a statement. “Despite those reports, however, my views expressed today are no different than the views I have expressed previously.”
Stocks gained Wednesday following news reports that Mr. Roubini said the U.S. economy would emerge from its recession at the end of the year. However, late Thursday, the economist released a statement saying that the comments were taken out of context and that his views remain the same.
According to him, the United States is in the 19th month of a 24-month recession. He believes that there will be a shallow recovery in which the economy’s growth will average about 1% in the next few years, contrary to other predictions that the economy will bounce back by 2010.
“Simply put, I am not forecasting economic growth before year’s end,” Mr. Roubini said.
He also emphasized that there is a risk of a W-shaped recession near the end of 2010, when the U.S. faces a new setback amid an “anemic” recovery and deflationary pressures while large budget deficits and their monetization raise long-term interest rates.
Mr. Roubini also said that the labor market is still very weak. He predicts a peak unemployment rate close to 11% next year, thus hurting labor income and consumption growth, leading to more defaults and losses on bank loans.
