Economist Martin Feldstein, the keeper of the official recession call, says the U.S. economy is not in recession, but growth could turn negative in the near future. He made his comments this morning on "Squawk Box." (See clip below.) For now, he sees the economy growing slowly:
"I think that for the next quarter or so that is the most likely outcome, but I think there is a serious risk it could get worse than that, and you could see an actual downturn," said Feldstein, the president of the National Bureau of Economic Research.
NBER is a prestigious private sector group that is viewed as the authority on business cycles so Feldstein's comments carry a lot of weight when it comes to the "r" word:
"I think we're not in a recession now. I think we're seeing the industrial production expand, consumer spending expand. Even employment, while not up very much rose in the most recent month. But we're seeing a very sharp decline in growth."
Feldstein said fourth quarter growth will likely drop to a number just above one percent from a level of near five percent in the third quarter, and that trend will continue into the first quarter. Washington should move quickly on fiscal stimulus, he said:
"Well, I think that doing something, as I said a down payment, a small (tax) cut now when we’re not sure whether we’re going to need a major stimulus would be a good thing and that would get it happening quickly. I think passing legislation that promises a triggered response if the economy softens substantially would, in itself, be a boost because people would have confidence that if the economy starts to slide, there’d be that fiscal package there to turn things around."
Feldstein appeared on "Squawk" along with Treasury Secretary Hank Paulson. Paulson, as usual, said that the U.S. believes in a strong dollar, a comment that has grown tired as the dollar trades at historic lows. Feldstein had his own dollar view:
"Well, I think a strong dollar at home - that is to say a dollar whose purchasing value is protected because we don't have high inflation in the United States..a strong dollar at home is a good thing for us. But a competitive dollar internationally is very important...and we're seeing the payoff from that."
Paulson declined to speak about details of any potential stimulus package and said it will be the decision of President Bush whether a package is introduced later this month. He said for now his discussions with Bush are private.