OECD predicts America will escape double-dip recession

The Guardian

The United States will experience a slow, jobless recovery from its deepest and longest downturn since the 1930s but will avoid a double-dip recession, the Organisation for Economic Co-operation and Development said today.

In its annual health check of the world's biggest economy, the Paris-based OECD said that it expected activity to expand by 2.6% in both 2010 and 2011 without having a marked impact on the country's near double-digit jobless rate.

The OECD report was published on the day that the body responsible for gauging the length of US economic cycles said that the economy officially came out of an 18-month recession in June 2009 – making it the longest downturn since the Great Depression.

"The recession lasted 18 months, which makes it the longest of any recession since world war II," the National Bureau for Economic Research (NBER) said. "Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months."

Angel Gurría, the OECD secretary-general, said: "It is becoming increasingly clear that the economy has entered a soft patch, but this is not inconsistent with previous recoveries."

Presenting the OECD outlook on the US in New York, Gurría added: "We don't see a risk of a double-dip recession. That said, we don't see either a recovery that is strong enough to put a significant dent in unemployment."

Amid recent signs that the pace of recovery in the US has slowed, the head of the west's leading economic thinktank said that support for the economy from monetary and fiscal policy was required. Gurría welcomed the extension of unemployment benefits, job training and tax credit for companies hiring workers, as well as the announcement from Ben Bernanke, the chairman of the Federal Reserve, that additional stimulus would be provided by the US central bank if it were needed.

The US has seen its budget deficit widen appreciably during the recession, and the OECD said it was appropriate that Washington should be aiming to cut the shortfall to 3% of national output by 2015.

Gurría also welcomed the establishment by President Obama of the bipartisan National Commission on Fiscal Responsibility and Reform, with a mandate to propose additional measures to achieve fiscal consolidation. "Even if measures are to be implemented only at a later stage, spelling them out now is an important signal," he said.

The NBER said: "In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favourable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month."

It added that American GDP – a measure of economic activity – was 3.1% higher in the second quarter of 2010 than it had been in the second quarter of 2009. But GDP remained 1.3% below its level in the final three months of 2007, when the US recession officially began.