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Is Another Recession Coming?

Aired April 02, 2003 - 14:25   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


JUDY WOODRUFF, CNN ANCHOR: As we see those pictures from Iraq in the Gulf region, we remember -- some of us remember vividly that the last Gulf War helped to push the U.S. economy into a recession. And now there is a growing chorus of economists worrying that the same thing might happen again.
CNN's Kathleen Hays joins us from New York with an update.

Kathleen, what are the economists and the others that you're talking to say that the risk is after this war?

KATHLEEN HAYS, CNNfn CORRESPONDENT: Well, the risk right now, Judy, is, as one economist put it so well, we're in a window of vulnerability.

Businesses are waiting to see what will happen with the war. Looks like more consumers are waiting to see what happens with the war. And I think one of the biggest problems that we've seen the last few months is businesses aren't hiring.

We had a mild recovery last year but what people call a jobless recovery. And the fact now that businesses are continuing not to hire, continuing not to make investment decisions, puts us in a period of stalling out. And a lot of the economists say the long of that stalling period lasts, the bigger the risk of recession.

And all of this, of course, is tied to the war itself. The longer the war lasts, the bigger that worry seems to be getting.

WOODRUFF: And so, Kathleen, to what extent do they think this may follow the pattern that we saw back in 1991 after the first Persian Gulf War?

HAYS: Well, I think the good news is that some people think that maybe right now going into it, the economy is on a little bit firmer footing than it was in a similar period 12 years ago. But let's look at some of the things the economists look at, because there are some real key indicators that give us a sense of what the economy's vulnerabilities to recession are.

We know that we're in a job market slump. We saw that in the last business cycle, the early '90s. Manufacturing has stalled out. We've had some high profile numbers suggesting this week that after some incipient growth that created optimism on Wall Street, the manufacturing sector is losing orders, production is being cut back and jobs aren't just growing there. Consumer spending's weak, we've seen that especially in auto sales. Three months in a row now, where even with incentives people just aren't buying cars like they were last year.

Finally, high oil prices are a big risk to the economy. The more we have to pay for gasoline, the more we have to pay for home heating oil, the less we can spend on other things. And if the consumer pulls back, then that is one of the biggest risks that could really make the difference and push us from a point of vulnerability over into something like a recession.

WOODRUFF: Well, I know that all of us are paying close attention to this, Kathleen. And no doubt the president is, as well. We're told that the one meeting he has on his schedule, public meeting, is a session with economists at the White House.

All right, Kathleen Hays. Thank you very much.

HAYS: My pleasure.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com






Aired April 2, 2003 - 14:25   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JUDY WOODRUFF, CNN ANCHOR: As we see those pictures from Iraq in the Gulf region, we remember -- some of us remember vividly that the last Gulf War helped to push the U.S. economy into a recession. And now there is a growing chorus of economists worrying that the same thing might happen again.
CNN's Kathleen Hays joins us from New York with an update.

Kathleen, what are the economists and the others that you're talking to say that the risk is after this war?

KATHLEEN HAYS, CNNfn CORRESPONDENT: Well, the risk right now, Judy, is, as one economist put it so well, we're in a window of vulnerability.

Businesses are waiting to see what will happen with the war. Looks like more consumers are waiting to see what happens with the war. And I think one of the biggest problems that we've seen the last few months is businesses aren't hiring.

We had a mild recovery last year but what people call a jobless recovery. And the fact now that businesses are continuing not to hire, continuing not to make investment decisions, puts us in a period of stalling out. And a lot of the economists say the long of that stalling period lasts, the bigger the risk of recession.

And all of this, of course, is tied to the war itself. The longer the war lasts, the bigger that worry seems to be getting.

WOODRUFF: And so, Kathleen, to what extent do they think this may follow the pattern that we saw back in 1991 after the first Persian Gulf War?

HAYS: Well, I think the good news is that some people think that maybe right now going into it, the economy is on a little bit firmer footing than it was in a similar period 12 years ago. But let's look at some of the things the economists look at, because there are some real key indicators that give us a sense of what the economy's vulnerabilities to recession are.

We know that we're in a job market slump. We saw that in the last business cycle, the early '90s. Manufacturing has stalled out. We've had some high profile numbers suggesting this week that after some incipient growth that created optimism on Wall Street, the manufacturing sector is losing orders, production is being cut back and jobs aren't just growing there. Consumer spending's weak, we've seen that especially in auto sales. Three months in a row now, where even with incentives people just aren't buying cars like they were last year.

Finally, high oil prices are a big risk to the economy. The more we have to pay for gasoline, the more we have to pay for home heating oil, the less we can spend on other things. And if the consumer pulls back, then that is one of the biggest risks that could really make the difference and push us from a point of vulnerability over into something like a recession.

WOODRUFF: Well, I know that all of us are paying close attention to this, Kathleen. And no doubt the president is, as well. We're told that the one meeting he has on his schedule, public meeting, is a session with economists at the White House.

All right, Kathleen Hays. Thank you very much.

HAYS: My pleasure.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com