Dr. Doom rises again

Economist Nouriel Roubini predicts more job losses and economic turmoil, and he argues for more stimulus spending.

By Kim Peterson Nov 16, 2009 1:33PM
Whenever I read a piece by noted economist Nouriel Roubini, I need to resist the urge to hide in the closet with a bag of Cheetos and wait for the world to end.

This guy didn't get the nickname "Dr. Doom" for nothing.

But the problem is, he's right much of the time. For years, he was warning that a bubble in the housing market would dismantle the U.S. economy. He didn't get enough credit then, but now people are listening.
You can forget about a recovery, Roubini says. The worst is yet to come. More people will lose their jobs. The damage will be "extensive and severe."

The official unemployment rate is 10.2%, but that rises to 17.5% when you include discouraged and partially employed workers, Roubini writes in The New York Daily News.

And job losses will continue for another year at least, he adds.

"If you are unemployed and looking for work and just waiting for the economy to turn the corner, you had better hunker down," he writes. "All the economic numbers suggest this will take a while. The jobs just are not coming back."

Can anything be done? Roubini writes that there's pretty much only one option: more stimulus spending. A new round of federal money for infrastructure projects and cash-strapped governments.

Combine that with a temporary tax credit for companies that hire more workers.

This country just isn't going to get back many of the lost jobs, Roubini writes. New studies suggest that a quarter of U.S. jobs could be outsourced for cheaper to other countries, and you can bet that companies are exploring that idea.

Roubini expects the unemployment rate to peak close to 11% and stay at high levels for at least two years.

And here are the end results of the weak labor markets:
  • Larger budget deficits
  • More defaults on mortgages
  • A bigger drop in real-estate prices
  • More mortgage-related losses for banks
  • More defaults on credit card debt, car loans and student loans
  • More bank failures
Pass the Cheetos. This could get ugly.

Related reading:

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