Local expert: 2nd economic downturn is looming - KMSP-TV

With job losses, 401Ks that have bottomed out and a lingering housing crisis, Americans are still recovering from the Great Recession -- but one local expert says a second one is just around the corner.

Probability models going back to the 1960s show that when the threshold exceeds 75 percent, a recession is on the horizon. As of Monday, models showed a 90 percent probability.

The man behind the model is nicknamed Dr. Doom and Gloom, and he's certainly living up to the name with his economic predictions.

"We're just dead in the water here," said Jim Nowak, who assesses risk for independent banks.

Nowak says summer storm clouds are brewing in a stifling economy. The dark omens began appearing on Monday morning, with new numbers out showing a contracting manufacturing sector. For the first time in three years, orders are down.

By the afternoon, Nowak's models were showing a 90 percent probability of a shallow recession in the next 6 months.

"With credit drying up and money disappearing through losses, we're kind of losing firepower -- sputtering, from an economic perspective," he explained.

Those sputters started with a recession in Asia and a European debt crisis. Link that to sluggish consumer spending at home -- which certainly doesn't help companies like Best Buy -- and it soon becomes a vicious cycle. Unemployment goes up, credit gets tight and banks stop lending.

"This is the cycle," Nowak predicted. "We're in shallow recovery, shallow recessions -- more of them packed together. Things are volatile and uncomfortable, and it's going to be difficult for anyone to plan.

The Dow was down eight points today on fears of recession, though that's not many. Still, the market is waiting for the latest service sector report on Thursday and the jobs report on Friday. Thursday's report will be key since 70 percent of the economy is based on the service industry.

Many in the business community are also a little shaken by the Supreme Court's decision to let the Affordable Care Act stand, and a new survey showed a quarter of businesses in the Midwest believe it will be their biggest obstacle in 2013. Medtronic will see a direct impact from the excise tax on medical devices, which is projected to cost $150 million.