Double-Dip Recession Looms After Markets React to US Debt Downgrade

It’s been nearly thirty years since high inflation and unemployment in the 80’s plunged the nation into a double-dip recession, and as world market reaction to Friday’s Standard & Poor’s downgrade registers, concern over a double-dip recession for the US looms anew.

Stock blog Seeking Alpha counted off a fairly compelling list of reasons the US may lose its tenuous grasp on recovery and backslide into a second depression, starting off with unemployment. Jobless numbers have remained high since the start of this recession, topping out at over 10% during their 2009 peak. And while numbers have improved slightly, there has not been a promising change in the unemployment rate.

Corporate outlook remains conservative in light of “weak consumer demand,” and increased commodities pricing coupled with impending layoffs portends more doom and gloom in the coming months. And even before the S&P’s frightening downgrade of the US’s credit rating late Friday, economists were not upbeat on the possibility of recovery in areas like unemployment:

“July’s employment report will go some way to reducing fears that the economy is slipping into another recession,” Paul Dales, senior U.S. economist with Capital Economics, acknowledged in a note to clients.

But he was quick to follow it up with these words of caution.

“But it highlights that the labor market has hardly recovered at all from the recession and that the economy is not growing fast enough to reduce significantly the unemployment rate,” he said.

One small, somewhat bright spot in the markets today came in the form of higher than expected performance for gold and Treasuries. And credit rating agency Moody’s affirmed their decision to keep US standing at the highest level, saying that while the political squabbling that lead to the Tea Party downgrade was a factor in determinations, they expect the US economy to have implemented proper corrective measures by 2013.

Do you think the US economy is headed for a double-dip recession?