From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

Stocks plummeted today. The Dow, the NASDAQ and the S&P were all down more than 4 percent. It's a reflection of growing anxiety over the economy. In the first half of this year, the economy barely grew, manufacturing is flat. Europe's debt problems are mounting and economists aren't expecting good news about jobs from the Labor Department tomorrow. These indicators and more are raising questions about whether we're headed for a double-dip recession, as NPR's Yuki Noguchi reports.

YUKI NOGUCHI: The U.S. economy is already skirting the razor's edge that separates recession from recovery.

LAWRENCE MISHEL: There is no emerging source of demand that's going to lead us to a surge of growth.

NOGUCHI: Lawrence Mishel is president of the Economic Policy Institute. He says no one is spending money, not consumers, not businesses and not government.

MISHEL: There does not seem to be any rescue in sight. If consumers are dead in the water and businesses aren't going to expand, if government is taken out of the equation by concerns over debt and deficits, then it's unlikely we're going to get any strong growth.

NOGUCHI: Mishel and most other economists believe the economy won't venture into negative territory this year, but things look grim just a little further out.

NIGEL GAULT: There's just enormous risks for 2013.

NOGUCHI: Nigel Gault is chief U.S. economist for IHS Global Insight. He says at the beginning of 2013, the economy will face more headwinds. The Bush tax cuts are set to expire, bigger deficit spending cuts will kick in and that's also when Congress faces another decision about whether to raise the debt ceiling. Gault says the economy might be able to absorb those blows, but only if it doesn't encounter any unexpected bumps in the next year.

GAULT: And it means that if we were hit with another shock, say from the euro zone, an explosion of the debt crisis, say from the Middle East, some interruption into oil supplies, I think that probably would drive us into recession.

NOGUCHI: But, of course, Europe is looking unstable. Markets plummeted sharply on debt worries in the larger economies of Italy and Spain. Ian Shepherdson is U.S. economist for High Frequency Economics. Generally, he says he's no optimist.

IAN SHEPHERDSON: I've been miserable for years.

NOGUCHI: But Shepherdson is among the believers that the U.S. can stabilize in the next year.

SHEPHERDSON: I think the absolute key engine for the economy is going to be the behavior of the small business sector, which accounts for about half of GDP.

NOGUCHI: He says banks that cut off lending to small businesses are starting to lend to them again. And that means, for the first time in years, those businesses will start expanding and hiring. Small businesses accounted for two-thirds of all new jobs. Plus, Shepherdson says, those are better kinds of jobs for economic growth.

SHEPHERDSON: Because they're mostly domestic, they generate all their jobs at home, not in China or Vietnam or Bangladesh. And so, dollar-for-dollar, growth in the small business sector is exactly what you need to generate proper employment growth and to give the economy a solid base.

NOGUCHI: But then there are those who say the economy's problem isn't one of demand or lending. They say the recession has prompted a permanent structural change in employment. Gary Burnison is one such person. He is CEO of the executive recruitment firm Korn/Ferry. He says technology has replaced unskilled work, and that means hiring is not coming back with a bang.

GARY BURNISON: Whether it's a double dip, I would say it's a long drip.

NOGUCHI: Burnison says there's also psychological after-effects from the financial crisis. He recalls friends of his, other executives, panicking three years ago.

BURNISON: And they were actually pulling money out of banks, you know, they had this hoarding of cash mentality. So, you know, that's very much in the minds of people to this day.

NOGUCHI: So even now, they continue to remember those days, and they watch every penny they spend and remain reluctant to hire. Technically, the economy might not be in a recession, but it may continue to feel that way for many Americans. Yuki Noguchi, NPR News, Washington.

Copyright © 2011 NPR. All rights reserved. Visit our website terms of use and permissions pages at for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR’s programming is the audio.



Please keep your community civil. All comments must follow the Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.

NPR thanks our sponsors

Become an NPR sponsor

Support comes from