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Freefalling stock market, expectations of a lackluster jobs report, spending cuts: recipe for a double-dip recession?

Traders work on the floor of the New York Stock Exchange during afternoon trading.
Traders work on the floor of the New York Stock Exchange during afternoon trading.
Andrew Burton/Getty Images

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It’s ugly out there—after an initial rally on Monday, when Congress and President Obama reached a deal to raise the debt ceiling and avoid default, the Dow Jones Industrial Average since then has been in a foul mood, reflecting overall pessimism about the American economy. Today the market closed with losses over 400 points; tomorrow an underwhelming jobs report is expected, where jobs were added in July but not nearly enough to encourage robust economic growth. Consumer spending remains lackluster and increasingly economists are sounding the alarm on the impact of reduced government spending due to the deficit reduction measures. Removing trillions of dollars from the economy over the next ten years, when the economy is already struggling mightily, might be enough to tip the country back into a recession. Had enough bad news—wait, there’s more. The likely loss of unemployment benefits for 3.71 million Americans in a few months will only add to an economy edging closer to recession. Finances at the state and municipal levels continue to be hampered, there isn’t another stimulus coming from the government—not that the first one was effective—and the jobs simply aren’t there. Is a double dip recession inevitable?


Roben Farzad, senior writer for Bloomberg Businessweek