The fallout from the worst recession since the 1930s means U.S. contractions will be more frequent and severe, according to Neal Soss, chief economist at Credit Suisse in New York.
“The era of rare, brief and mild recessions from the early ’80s to the mid-2000s is over,” Soss said today on a conference call.
Increased regulation and a drive to hold less risky assets such as cash following the financial meltdown will eliminate some of the instruments that helped smooth out economic growth over the past two decades, particularly in the U.S., Soss said. The current slowdown, while unlikely to result in a renewed downturn, will seem worse because the rebound has been weak.
“The starting point of high unemployment, high vacancies and low capacity utilization means any slowing in growth is going to feel dangerously close to a renewed recession,” Soss said. “It’s not the same thing, but it’s going to feel like it.”