Thoughts on Where We Are
Editor’s Note: The following are excerpts of a briefing this week Nouriel Roubini delivered to RGE Analysts in New York.
Roubini on ‘U’ and ‘V’ Shaped Recoveries
I was thinking about anemic growth, which I’ve been saying means 1-1.5% growth next year, which denotes a U-shaped recovery. But what if we see 2% growth next year for a while? 2% is better than 1.5%, but implies that the output gap is still rising, assuming that potential GDP and unemployment are also still rising. This happened in the 2002 recovery for a few quarters. So if growth is closer to 2% rather than 1% for a number of quarters—and potential growth is 2.75% —to me that’s still a U-shaped recovery. Even if you go to potential growth at 2.75%, that’s not enough to mop up all that excess slack in the output gap and labor markets for a while.
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