Calculated Risk predicts continued sluggish and choppy growth, no double dip

A little over a week ago, I made the case that we might be entering a new recession right now. Lots of other commentators have chimed in with similar warnings.

But Bill McBride, at Calculated Risk, is sticking with his previous prediction that “growth will remain sluggish, but I expect 2011 to be better than 2010 for both employment and GDP growth.”

It’s by no means a pie-in-the-sky prediction, as McBride details the temporary factors of the disruptions from the Japanese earthquake and tsunami, extreme weather, and the peak in gas prices, and points out the ongoing drags to the economy:

• Less Federal stimulus spending in 2011. The American Recovery and Reinvestment Act of 2009 (ARRA) is winding down, and will be a drag on GDP growth.

• The ongoing cuts in state and local spending.

• The festering financial crisis in Europe. Although the direct impact on U.S. trade would be minimal, there could be a significant financial impact on the U.S. if Greece (and other countries) default.

• The slowdown in China impacting U.S. exports.

• Another downturn in house prices.

So why believe McBride? I’ve been following his blog closely for several years, and I agree with the assessment of James Hamilton, an important economic commentator in his own right, who assessed Calculated Risk when ranked it the 4th most important economics blog: “I’ve followed him closely [since 2005], and I don’t know if he’s ever been wrong. My advice is, if you’ve come up with a different conclusion from McBride on how economic developments are going to unfold, you’d be wise to think it over again!”

This is not exactly a sunny outlook, but McBride’s post is worth a read.