White House says risks of recession have risen

By Alister Bull

WASHINGTON (Reuters) - Recession risks have increased amid weakness in housing and financial markets but "real America" is still doing just fine, a top White House economic adviser said on Tuesday.

"Obviously, the chances of a recession are higher now than they were a year ago, but we still think it's less than 50:50," Allan Hubbard, economic advisor to President George W. Bush, told CNBC television during an interview.

"I don't know what it is, but the bulk of the economy is doing just fine. We obviously have problems in the housing sector and we have problems in the financial sector, but ... real America is doing just fine," he said.

A collapse in the U.S. market for subprime mortgages has spurred a global financial credit crunch and unnerved investors who fear the world's largest economy is heading for a fall.

Goldman Sachs earlier lowered its U.S. economic growth forecast and said the risks of a recession had mounted to 40-45 percent, from about one third before.

In addition, former U.S. Treasury Secretary Lawrence Summers wrote in the Financial Times on Monday that the fallout from the subprime crisis meant "the odds now favor a U.S. recession that slows growth significantly on a global basis."

The United States last suffered a recession between March and November 2001, according to the National Bureau of Economic Research, a 10-year gap from the previous episode.

A recession is sometimes seen as two consecutive quarters of negative growth, but NBER has a broader definition. It says a recession occurs when there is a significant decline in activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income, and wholesale-retail trade.