Plunging Dow, consumer confidence: signs of 'double dip' recession?
Investors worldwide have grown more cautious about the outlook for the economy and corporate profits.
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But even a cooling in growth makes it harder for the economy to create new jobs. Economists are expecting a report due Friday to show that the US economy lost jobs in June, after five months of gains.Skip to next paragraph
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"We share the view that the economy is strengthening, that we are into recovery," Mr. Obama said Tuesday. But he added, "we’re now seeing some headwinds and some skittishness and nervousness on the part of the markets and on part of business and investors. And so we’re still going to have to work through that."
One prominent forecasting firm, IHS Global Insight in Lexington, Mass., sees a 20 percent risk of a double-dip recession for the world economy. In a report last week, the firm predicted that the US economy will grow 3.4 percent this year, slowing to 2.8 percent in 2011. Its forecast for global gross domestic product (GDP) growth is 3.8 percent this year and 3.6 percent in 2011.
For now, the US government is receiving one benefit from investors' heightened focus on economic risks: Money has been pouring into US Treasury bonds, as a "flight to safety" trade.
That is keeping borrowing costs low for the Treasury, even though the US has its own sovereign-debt challenge to confront at some point. The interest rate on 10-year Treasury notes (which falls when bond prices rise) has plunged from about 4 percent in April to below 3 percent Tuesday. That's its lowest level since early 2009, when policymakers were still trying to quell the US financial crisis.
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