The American economy just can’t catch a break.
Last year, as things started looking up, the European debt crisis flustered the fragile recovery. Now, under similar economic circumstances, comes the turmoil in the Middle East.
If the recent rise in oil prices sticks, it will most likely slow a growth rate that is already too sluggish to produce many jobs in this country. Some economists are predicting that oil prices, just above $97 a barrel on Thursday, could be sustained well above $100 a barrel, a benchmark.
But other sources of economic uncertainty besides oil prices have come into sharper focus in recent days. After a few false starts, housing prices have slid further. New-home sales dropped sharply in January, as did sales of big-ticket items like appliances, the government reported Thursday.
Though the initial panic from last year has faded, Europe’s deep debt problems remain, creating another wild card for the global economy. Protests turned violent in Greece this week in response to new austerity measures.
Budget and debt problems at all levels of American government also threaten to crimp the domestic recovery. Struggling state and local governments may dismiss more workers this year as many face their deepest shortfalls since the economic downturn began, and a Congressional stalemate over the country’s budget could even lead to a federal government shutdown.
In the last week, oil prices have risen more than 10 percent and even breached $100 a barrel. A sustained $10 increase in oil prices would shave about two-tenths of a percentage point off economic growth, according to Dean Maki, chief United States economist at Barclays Capital. The Federal Reserve had forecast last week that the United States economy would grow by 3.4 to 3.9 percent in 2011, up from 2.9 percent last year.
Higher oil prices restrain growth because they translate to higher fuel prices for consumers and businesses.
