We need more of those shovel ready jobs and 700 million dollar bailouts.
looks like I'll be on the bike within the next month. When diesel hits $5 a gallon again soon it won't make $$ sense to go to work anymore.....it's not if now....it's WHEN.
By Catherine Rampell, Motoko Rich and David Streitfeld THE NEW YORK TIMES
The U.S. economy just can't catch a break.
Last year, as things started looking up, the European debt crisis flustered the fragile recovery. Now, under similar economic circumstances, comes the turmoil in the Middle East.
Energy prices have surged in recent days, as a result of the political violence in Libya that has disrupted oil production there. Prices are also climbing because of fears the unrest may continue to spread to other oil-producing countries.
If the recent rise in oil prices sticks, it will most likely slow a growth rate that is already too sluggish to produce many jobs in this country. Some economists are predicting that oil prices, just above $97 a barrel Thursday, could be sustained well above $100 a barrel, a benchmark.
Even if energy costs don't rise higher, lingering uncertainty over the stability of the Middle East could drag down growth, not just in the United States but around the world.
“We've gone beyond responding to the sort of brutal Technicolor of the crisis in Libya,” said Daniel H. Yergin, oil historian and chairman of IHS Cambridge Energy Research Associates. “There's also a strong element of fear of what's next, and what's next after next.”
Before the outbreak of violence in Libya, the Federal Reserve had raised its forecast for U.S. growth in 2011, and a stronger stock market had helped consumers be more confident about the future and more willing to spend.
But other sources of economic uncertainty besides oil prices have come into sharper focus in recent days. After a few false starts, housing prices have slid further. New-home sales dropped sharply in January, as did sales of big-ticket items like appliances, the government reported Thursday.
Although the initial panic from last year has faded, Europe's deep debt problems remain, creating another wild card for the global economy. Protests turned violent in Greece this week in response to new austerity measures.
Budget and debt problems at all levels of U.S. government also threaten to crimp the domestic recovery. Struggling state and local governments may dismiss more workers this year as many face their deepest shortfalls since the economic downturn began, and a congressional stalemate over the country's budget could even lead to a federal government shutdown.
“The irony is that we just barely got ourselves up and off the ground from the devastating financial crisis,” said Bernard Baumohl, chief global economist at the Economic Outlook Group, who had been optimistic about the country's prospects. “The recovery itself is less than two years in, and we haven't yet seen jobs make a decent comeback. Now we're being hit with this new, very ominous event, so the timing couldn't be worse.”
Most economists are not yet talking about the United States dipping back into recession, and it is too soon to tell how far the pro-democracy protests that have roiled Egypt, Bahrain and Libya will spread. For now, most analysts are not predicting that Iran and Saudi Arabia, repressive governments that also happen to be two of the world's biggest oil producers, will catch the revolutionary fever.
“But revolutions are notoriously difficult to forecast,” said Chris Lafakas, an economist at Moody's Analytics who focuses on energy.
Disruptions of oil supplies in Saudi Arabia and Iran in particular, he said, “would be catastrophic for prices. Saudi Arabia alone could cause maybe a 20 to 25 percent increase in oil prices overnight.”
In the past week, oil prices have risen more than 10 percent and even breached $100 a barrel. A sustained $10 increase in oil prices would shave about two-tenths of a percentage point off economic growth, according to Dean Maki, chief U.S. economist at Barclays Capital. The Federal Reserve had forecast last week that the United States economy would grow by 3.4 percent to 3.9 percent in 2011, up from 2.9 percent last year.
Higher oil prices restrain growth because they translate to higher fuel prices for consumers and businesses. Lafakas estimates that oil prices are on track to average $90 a barrel in 2011, from $80 in 2010, an increase that would offset nearly a quarter of the $120 billion payroll tax cut that Congress had intended to stimulate the economy this year.
“Revenue is down, costs are up, and you can't make any money,” said R. Jerol Kivett, the owner of Kivett's Inc., a company that manufactures pews and other church furniture in Clinton, N.C. “You're just trying to meet payroll and keep people working, hoping the economy will turn. But it just seems like setback after setback after setback.”
And the money that consumers and businesses spend on oil often does not stay within the U.S. economy. Nor do the expanded coffers in oil-producing countries raise demand for American exports, because they often bank it as reserves.
“The countries that are getting this bonus basically get an enormous benefit,” said Raghuram G. Rajan, an economics professor at the University of Chicago. “But if they can't spend it quickly, it doesn't add to aggregate demand.”
The rise in oil prices could also create a vicious cycle, as higher energy costs propel already rising food prices, which in turn can lead to more political unrest and more global uncertainty.
Even without the Middle East, the domestic economy has a number of weaknesses that have proved hard to overcome. The recession was provoked by housing and worsened by housing, and housing is likely to remain frail in parts of the country until the end of the decade.
After a couple of brief growth spurts, home prices have started declining again in earnest. This week, Yale economist Robert Shiller speculated about another drop as large as 25 percent. Anything close to that would push millions more households to the point where they owe more on their houses than the houses are worth, generating a lot of sour moods — which can depress consumer spending — more foreclosures and potential job losses.
Oil prices pose latest threat to US economy
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