What’s wrong with the economy?

Date posted: July 27, 2012

This was the year the economy was supposed to hit its stride and to really begin to pull out of the hole dug during the recession. But instead the opposite has happened. The economy has slowed and is dangerously close to another recession. What happened? N.C. State University economist Mike Walden responds.

“I think there are four factors right now holding back economic growth: First, we’ve seen obviously a slowdown in Europe. In fact, several countries in Europe are actually in a recession. Europe is actually our biggest trading partner in terms of our exports. So, that’s having an adverse effect on our economy.

“Secondly, China slowed down. China, of course, manufactures a lot of products, sells them to us and to Europe. So, if Europe slows down, China slows down, we slow down, China slows down, and there (is) some back-and-forth there. So, China’s slowness is actually affecting us, too.

“Thirdly, although the housing market is showing signs of light, it is still well below its typical post-recessionary level. And that’s a key because usually the housing market is a real spark to recovery from recession.

“And then fourth, I think there’s a lot of uncertainty as we always see this time of year when we’re in an election cycle: uncertainty over the election, who will be president, who will control the Congress, what kind of policies will be implied from that.

“So altogether, what’s happened, I think, right now is the economy is moving forward, but it’s going a half step rather than a full step.”

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