By ALAIN SHERTER
MONEYWATCH February 22, 2016, 6:00 AM
For months, most economists and pundits have confidently predicted that the U.S. would escape the storm being whipped up by the ailing global economy. President Obama, too, couldn't resist a little chest-thumping recently after federal data showed that the nation's unemployment rate had fallen in January to 4.9 percent.
Such optimism looks increasingly misplaced. A raft of economic signals shows that slowing growth overseas, held back by China's ongoing deceleration, is already taking a toll on the American economy and threatening to send the recovery into reverse. Private forecasters are paring their 2016 estimates for U.S. growth to around 2 percent, down from the already modest 2.4 percent rate of expansion over the previous two years. And that assumes everything goes right.
If things go wrong, even those tepid projections are likely to slip. The Organization for Economic Cooperation and Development has already downgraded its forecast this year, leading the group's chief economist to say that "global growth prospects have practically flat-lined." The downturn is evident not only in Asia, but also in Europe and Latin America, where Brazil and Venezuela are already in recession and Argentina is close on their heels.
Although there is never an opportune time for a recession, the current moment poses singular challenges for the U.S. The economy has failed to regain the momentum it had before the 2008 financial crisis, while questions abound regarding the country's long-term prospects. Some prominent economists argue that we may be in store for years of "secular stagnation," potentially widening the cracks in the economy caused by inequality and eroding Americans' standard of living.
That unsettling sense of stasis, especially with tens of millions of Americans already just getting by, coincides with what is emerging as the most serious threat to global expansion in decades. This much is clear: The challenges facing China and other developing countries are, in an economically interconnected age, also our own. If the storm does come, national borders are unlikely to offer shelter.
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