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Obama Wars Title: Roubini Sees ‘Dismal’ Growth as Summers Rues ‘Human Recession’ Roubini Sees ‘Dismal’ Growth as Summers Rues ‘Human Recession’ By Simon Kennedy and Erik Schatzker Feb. 1 (Bloomberg) -- Nouriel Roubini, the New York University professor who anticipated the financial crisis, said the U.S. growth outlook remains “very dismal” and White House economic adviser Lawrence Summers said the economy is still mired in a “human recession.” Speaking at the World Economic Forum’s annual meeting in Davos, Switzerland, after the U.S. reported the fastest growth in six years, their comments underscored concern that that emergency measures to rescue banks and fight the recession may be withdrawn too soon. “The headline number will look large and big, but actually when you dissect it, it’s very dismal and poor,” Roubini said in a Jan. 30 Bloomberg Television interview following a U.S. Commerce Department report that showed economic expansion of 5.7 percent in the fourth quarter. “I think we are in trouble.” Roubini said more than half of the growth was related to a replenishing of depleted inventories and that consumption was reliant on monetary and fiscal stimulus. As these forces ebb, the rate will slow to 1.5 percent in the second half of 2010. Roubini, who chairs New York-based Roubini Global Economics LLC, has become famous for his pessimistic projections. In 2007, he correctly predicted a “hard landing” for the world economy. He said last year that the global recession would shrink through 2009, only for growth to resume in the middle of the year. He says now that while the world’s largest economy won’t relapse into recession, U.S. unemployment will rise from the current 10 percent amid “mediocre” growth. ‘Feel Like Recession’ “It’s going to feel like a recession even if technically we’re not going to be in a recession,” he said in the interview. Also speaking in Davos, Summers, director of the White House National Economic Council, said that the statistical recovery won’t mask a “human recession.” The U.S. expansion in the October-December period resulted from manufacturers cranking up assembly lines and companies increasing investment in equipment and software. The rebuilding of stocks contributed 3.4 percentage points to gross domestic product, the most in two decades. The rebound followed the Federal Reserve’s decision to cut its benchmark interest rate to near zero in December 2008 and President Barack Obama’s $787 billion stimulus package. The jobless rate has the central bank promising to keep borrowing costs low and Obama making new proposals to create jobs. ‘Pretty Attractive’ Carlyle Group LP co-founder David Rubinstein countered Roubini’s concerns. He said that even after a rally in global stocks that drove the MSCI World Index up more than 60 percent from March 2009, it’s a “pretty attractive” time to invest. “There are a lot of great opportunities we see in the United States and abroad,” Rubenstein told a Jan. 27 panel. “Sometimes generals fight the last war, economists fight the last recession.” Policy makers may be undermining their effort to spur hiring by attacking banks, Blackstone Group LP Chief Executive Officer Steven Schwarzman said in a Jan. 28 interview in Davos. One in four of chief executive officers worldwide surveyed by PricewaterhouseCoopers LLP for the Davos conference already plans to cut jobs this year. “Financial institutions will feel under siege and they will retreat,” Schwarzman said. “Their entire world is being shaken and they’re being attacked personally,” he said. “We don’t need those financial institutions insecure.” ‘Moderate’ Growth Summers, a former U.S. Treasury secretary, predicted growth will continue “at least at a moderate rate.” The median forecast of economists surveyed by Bloomberg News is for the U.S. economy to grow 2.7 percent this quarter. “What is disturbing is the level of unemployment,” said Summers. “One in five men in the U.S. between the ages of 25 and 54 is not working right now,” he told a Jan. 30 panel discussion. Even after a “reasonable” recovery, it will be “one in seven or one in eight.” That compares to the mid-1960s, when 95 percent of men in that age range were working and “suggests quite profound issues that will ultimately impact on politics and decisions that businesses make,” he said. A report scheduled for release by the Labor Department on Feb. 5 may show the U.S. gained jobs in January for the second time in three months. Payrolls probably rose by 13,000 workers last month according to the median forecast of 62 economists surveyed by Bloomberg. The unemployment rate may have held at 10 percent for the third month. ‘Right Direction’ Nobel Prize-winning economist Joseph Stiglitz said Obama’s previous efforts to bolster the economy are only “a step in the right direction.” “I’m a bit worried that again it’s not enough,” Stiglitz said in a Jan. 28 Bloomberg Television interview in Davos. “He has to take a much more active” approach. “It has to be a second round in stimulus, focusing in particular on investment.” International Monetary Fund Managing Director Dominique Strauss-Kahn, who two years ago used the Davos stage to lobby governments to increase spending, said policy makers in the U.S. and elsewhere risk narrowing their options if they withdraw emergency measures too soon and the recovery falters. “If you exit too early then the risks are much bigger,” Strauss-Kahn told the Swiss gathering. If the economy relapses “I don’t know what we could do as most of the things we had in the toolkit have been used.” To contact the reporter on this story: Simon Kennedy in Davos at skennedy4@bloomberg.netErik Schatzker in Davos at eschatzker@bloomberg.net Last Updated: January 31, 2010 18:00 EST
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