Recession? Nah, many say

WASHINGTON — The dreaded R-word -- recession -- is back in play, contributing to Tuesday's stock market plunge.

But is recession a real possibility?

Many analysts say recession is unlikely this year, that Tuesday's market sell-off was long anticipated and would be short-lived as the economy rebounds from a housing slump. Also helping the economy are renewed consumer and business spending, a strong but not overheated labor market and possible intervention by the Federal Reserve, analysts say.

"The economy is percolating along pretty well except for the housing sector," said Edward Leamer, director of the UCLA Anderson Forecast, adding, "We don't see anything in the data that we monitor that suggests the economy is having any real trouble."

Stanford University economist John Taylor said that Tuesday's stock market drop might restore some volatility to what has been an unusually stable stock market, but that it was not a reflection of economic troubles.

"If you look at the overall economy, both U.S. and global, you see continued growth," Taylor said.

Former Federal Reserve Chairman Alan Greenspan brought the R-word back Monday, suggesting a recession could come by year's end. And recent data, including a surprisingly weak durable-goods report Tuesday, suggest the economy has not rebounded as strongly as some analysts had expected.

Nouriel Roubini, chairman of Roubini Global Economics in New York and a professor of economics at New York University, had predicted a recession to begin in the first or second quarter of this year and said Tuesday's market downturn provided more evidence of impending trouble. The government today is also expected to sharply lower its estimate for growth in last year's fourth quarter, down to 2.5% from 3.5% last month.

"We have lousy economic news," said Roubini, a former White House and Treasury Department economist. "It's just the beginning of much worse things to come."

With the recovery now 5 years old -- long in the tooth by most economic standards -- such warnings are not easily dismissed. But other analysts drew a distinction Tuesday between the slow growth they're seeing and conditions that could tip the economy into recession.

"Recession is becoming in my opinion a rather rare event, because the government has learned to manage the economy better," said Keitaro Matsuda, senior economist at Union Bank of California in San Francisco.