Harvard's Economist: U.S. Economy Likely to Dodge Recession

The U.S. economy should dodge recession, said Harvard Professor Martin Feldstein, who heads the panel of economists which dates U.S. business cycles.

``If I had to make a likely guess, I would say slow growth, but not recession,'' Feldstein said in an interview in Jackson Hole, Wyoming, where he's attending the Federal Reserve's annual economic symposium.

A slump in housing, near-record oil prices and the highest Fed interest rates since 2001 have prompted some economists to speculate the world's largest economy may slip into recession next year as the economy slows after five years of expansion. David Rosenberg, chief North American economist at Merrill Lynch & Co., has said there is a 40 percent change of such a downturn.

Feldstein, who chairs the National Bureau of Economic Research, said a recession could occur if households made a ``decision to start saving again'' rather than keep spending as the housing market fades. New-home sales in the U.S. fell more than economists forecast in July and the number of unsold houses climbed to a record, the Commerce Department reported today.

``Household savings is now negative and that was driven by the fact that house wealth was up and that mortgage refinancing was very, very appealing,'' Feldstein said. ``People took that money and they went and spent a lot of it. So if that goes into reverse, that could tip the economy.''

Could? What is this guy smoking?

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