The US economy is going to be in serious trouble if it doesn’t get the fiscal stimulus it needs to get out of the financial crisis, according to an economist at the Federal Reserve Bank of Minneapolis.
“If the economy is already going to suffer from the impact of the recession, the recovery will be delayed,” said Fed President Jerome Powell, who also is a senior fellow at the Brookings Institution think tank.
The US is set to report its first quarter GDP growth of less than 2% in the third quarter, which could slow the recovery.
As a result, the unemployment rate could rise to 12% by the end of the year, and the cost of goods and services could rise, according the Brookings Institute.
There is also concern about how much economic growth the Federal government could provide to households.
While the unemployment rates for non-college graduates and those who have stopped looking for work could rise over the next three months, economists say it is not clear that these people would actually take the steps to find jobs.
Instead, many would be spending their money on higher-quality goods, including cars, homes and cellphones.
Powell warned that the recovery could take longer than expected.
“I think the longer the recovery is delayed, the more vulnerable the economy will be to a recurrence of the current downturn,” Powell said.
He also said that the US could experience a second recession in the coming year if the government did not increase stimulus.
It could also take longer to reverse the downward spiral.
Some economists say the economic slowdown has already begun, with the unemployment and debt levels of the US over $1 trillion higher than the year before the recession began.
One of the factors that is leading to the slowdown is a sharp decline in the number of new jobs in recent years, said Robert Tracinski, an economist with Capital Economics in New York.
This has been exacerbated by the collapse in the housing market and by an increase in household debt, which has also driven up household income, which was already lower.
“The economy is slowing,” Tracinksi said.
“But the recession itself has created a situation that is now pushing up the debt burdens for many people.”
A third factor that could affect the economy in the future is a collapse in consumer spending.
Retail sales have fallen in recent months, with retail sales declining in April for the first time since 2007, according a report from the Conference Board.
Despite the slow growth, the Federal Government has increased the number and size of food stamp recipients.
On Monday, the Fed increased the amount of cash it provides food stamp households, but only to the amount they actually spend.
The number of food stamps recipients is expected to increase as the economy recovers, with those who receive the aid increasing their spending.
The report comes as the Federal Budget Office said last week that the Federal budget deficit had risen to $8.1 trillion in December, the highest in three years.
The deficit is expected in January to fall to $5.1 billion.
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