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How Long Can the U.S. Consumers Carry the Economy on Their Shoulders?

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  • Philip Arestis
  • Elias Karakitsos

Abstract

The consumer has been on a tightrope since the bursting of the "new economy" bubble, as losses in equity markets have been partly offset by gains in real estate and fiscal support and mortgage refinancing have partly offset increased consumer cautiousness. The consumer will remain on a tightrope in the near future, but if the economy were to stumble, the fragile consumer might contribute to turning the downturn into a deep and protracted recession. There are two risks to the continuation of consumer resilience. The first arises from the fact that this has been a jobless recovery. The second arises from a growing personal sector imbalance that is fueled by the growing property bubble. Hence, the short-term outlook remains uncertain, but the long-term one is bleak.

Suggested Citation

  • Philip Arestis & Elias Karakitsos, 2003. "How Long Can the U.S. Consumers Carry the Economy on Their Shoulders?," Economics Working Paper Archive wp_380, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_380
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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