The Recession, Round Two?

There were more signs this week that the sluggish economy is persisting. Will the nation's economy keep lurching slowly forward, or will it slip backward and lead to a double-dip recession? NPR's Scott Simon talks with Professor Danny Boston of Georgia Tech.

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SCOTT SIMON, host:

This is WEEKEND EDITION from NPR News. I'm Scott Simon.

More signs this week that the sluggish economy is persisting. Friday brought news that consumer spending is flat, the Dow Jones Industrial Average dropped 400 points for the week. On Thursday, the Labor Department reported the number of people filing for unemployment benefits for the first time went up last week.

What can we tell from these trends? Will the nation's economy keep lurching slowly forward or will it slip backward and lead to a double-dip recession?

We're joined now from Professor Danny Boston of Georgia Tech. In addition to teaching there, he runs the Gazelle Index that analyzes the nation's fastest-growing African-American-owed businesses. Professor Boston, thanks so much being with us.

Professor DANNY BOSTON (Georgia Tech): Thank you for having me, Scott.

SIMON: Double-dip recession, to emphasize again, is when the economy improves for a period or two and then falls back. Many banks and major companies are doing well, so why aren't they hiring?

Prof. BOSTON: What corporations did was to take advantage of the downturn to undertake enormous downsize in their workforce. And that was in response to global competition. So some of the dynamics that we see in the labor market today actually are in response to events that have been taking place for the last 10 to 15 years.

As a result now, what they're doing is keeping the workforce that they have, investing a lot in technology, and trying to meet these same or new levels of output with the same workforce. And so you're getting increased profitability, no new hiring.

SIMON: When we say that the unemployment rate is almost 10 percent in this country, that leaves people with an idea that one out of every 10 people don't have a job. But I wonder, in some communities, among some groups of people in this country, is that perception of one in 10, if it's not a lot higher.

Prof. BOSTON: It is. It's significantly higher. For example, African-Americans, that unemployment rate is near 16 percent. It has been persistently high. Among Hispanics, it's around 13 percent. So that rate is high and it's almost, you know, if we were speaking of the country as a whole with rates that minorities such as African-Americans and Hispanics are currently experiencing, we would say, well, the country is in near-depression state.

SIMON: We mentioned you have a specialty in analyzing small businesses. What's the good news, bad news there?

Prof. BOSTON: When we went through the recession from 2007 into 2008, what we saw is that 85 percent of all of the net new employment was being created by businesses of 50 or fewer workers. So those small businesses are very, very important. And part of the challenge that we're having now is that that sector is not healthy. It's not nourished as much as we would need it to be nourished in order to grow - and they're being hurt from several directions.

One is they are normally linked to corporate supply chains, and of course as the corporate sector is cut back their business is cut back. They do a lot of business with government sectors, particularly local governments, and the local governments are in fiscal crises.

SIMON: Yeah.

Prof. BOSTON: And then just in order to make it through the recession, they had to rob Peter to pay Paul. And so their credit profile is pretty screwed up. And if they try to go in this new regulatory environment to borrow money, they don't stand a chance. And so they are really hurting. And unless we can do something to channel more business and capital to that sector, then it's going to make this process we're in much, much more difficult.

SIMON: I'm very uncomfortable at asking an economist to make another prediction. You know all the jokes about economists making predictions.

Prof. BOSTON: Sure.

SIMON: But all that being regarded: do you foresee a double-dip recession?

Prof. BOSTON: Well, the U.S. economy is certainly strong enough and fundamentally sound enough that we should not have a double-dip recession. And the only thing that I can see that would make that different is that there are some drastically adverse circumstances that would occur internationally.

SIMON: Professor Danny Boston of Georgia Tech, thanks so much.

Prof. BOSTON: My pleasure.

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