Trump`s Prediction of `massive recession` Puzzles Economists

In an interview with the Washington Post published on Saturday, the billionaire businessman said a combination of high unemployment and an overvalued stock market had set the stage for another economic slump. He put real unemployment above 20 percent.

"We're not heading for a recession, massive or minor, and the unemployment rate is not 20 percent," said Harm Bandholz, chief U.S. economist at UniCredit Research in New York.

The official unemployment rate has declined to 5 percent from a peak of 10 percent in October 2009, according to government statistics. But a different, broader measure of unemployment that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment is at 9.8 percent.

Coming off a difficult week of campaigning, in which he acknowledged he struggled to articulate his position on abortion among other missteps, Trump's comments to the Post might be some of his most bearish on the economy and financial markets.

"I think we're sitting on an economic bubble. A financial bubble," he said.

Some economists agree the stock market is in a period of overvaluation but do not see that as foretelling a cataclysmic economic downturn originating in the United States.

"Nobody can predict what the stock market is going to do," said Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University. "I cannot predict a stock market crash, so I cannot predict a recession. I don't see any of the reasons for a recession going forward unless there is a huge problem with the market or there is some catastrophic world event which is beyond the scope of economics."

Sung Won Sohn, an economics professor at California State University Channel Islands in Camarillo, put the probability of an imminent recession at less than 10 percent. "If it happens, it would be because of what is happening overseas, especially in China and Europe," he said.

REUTERS