Diane Swonk, chief economist and senior managing director at Mesirow Financial, told CNBC’s “Morning Call” that the strengthening economy makes it “hard to get to recession from here.”
The Labor Department said the economy added 157,000 new jobs in May while consumer and manufacturing sentiment rose.
“The worst wasn’t all that bad although soft landings are rocky – it’s when everybody applauds that the jet didn’t crash,” Swonk said Friday. “The good news is that we’re on our way to reaccelerating.”
Swonk said the first quarter inventory draw-down occurred while consumers continued to spend, setting the stage for robust growth in the second quarter. She said many workers in home building have moved into commercial or public projects, eliminating what some fear will be a sharp drop in construction employment.
“I see consumers saying ‘We’re a little more confident despite higher gas prices because the job market is better.’” Swonk said. “In an aggregate basis – and not everyone benefits from the stock market – but these stock market gains outweigh the housing market losses in wealth effects.”
Nouriel Roubini, chairman of Rgemonitor.com, said the economy is in a “growth recession.”
“The first quarter growth was 0.6%,” Roubini said. “In the second quarter, in April, private consumption was quite mediocre – in real terms only 0.2%. I think today’s numbers on employment will be revised downward.”
He said the housing slump will continue, eroding personal wealth and eventually slowing consumption.
“Real incomes in April were falling, oil prices are going up, home equity is falling, the value of the home is falling, home equity withdrawal is falling, debt service is going up,” he said. “These are all negative transfers. Consumption is 70% of GDP and if consumers falter, we’ll be in a growth recession.”