WASHINGTON More than two years into a global economic recovery, the rich world again threatens to drag the developing world into recession, while monetary and fiscal authorities look ill-equipped to react forcefully.
The United States is mired in a deep jobs crisis that makes many economists fear President Barack Obama's latest $450 billion stimulus bid will fail to put a significant dent in the 9.1 percent jobless rate. Job growth stagnated in August, raising expectations for some form of further monetary easing from the U.S. Federal Reserve later this month.
"The dramatic slowdown in the pace of employment growth in August signals a further deterioration in the economic backdrop, and augurs poorly for confidence and economic activity," said Eric Green, managing director of U.S. rates research at TD Securities.
In Europe, financial conditions are deteriorating rapidly, with Italy again near the top of the market's worry list.
International Monetary Fund staff are concerned that the IMF's resources may prove sorely lacking if global financial conditions worsen and more countries turn to the lender for financial rescues, according to an internal document obtained by Reuters.
The document, which cited the European debacle as a major obstacle to growth, said upcoming IMF reports would highlight a "marked increase in the risks to financial stability".
Market volatility stemming from this uncertainty has exerted a palpable drag on emerging economies. Brazil, for instance, recently posted a string of disappointing numbers that drove the country's central bank to cut interest rates unexpectedly.
The Group of Seven finance ministers agreed on Friday to respond in concert to a slowdown in the global economy but produced no concrete action to calm markets spooked by signs of faltering growth and financial turmoil.
China's economic performance has remained robust, with gross domestic product seen expanding some 9 percent this year and at least 8 percent in 2012.
Still, many analysts fear trouble could be brewing, and Fitch Ratings warned on Thursday it might downgrade China's credit rating within two years due to the large debt loads of the country's banks.
In the United States, a raft of data coming this week should confirm a recent trend pointing to sluggish growth but not recession. Economists expect retail sales expanded by an anemic 0.2 percent last month, perhaps deterred by consumer uncertainty surrounding the political battle over raising the nation's debt ceiling.
Key business barometers will include a reading on industrial production for August and, even more timely, a fresh look at Mid-Atlantic manufacturing for September. A collapse in the Philadelphia Fed's Mid-Atlantic index last month to -30.7 sent investors scrambling for cover. Economists see the index rising to a still-depressed -15.0.
Inflation figures might offer some comfort to Fed policymakers that the early 2011 spike in prices was indeed transitory. August's consumer price index is expected to rise 0.2 percent, following July's 0.5 percent jump.
Producer prices are projected to fall 0.1 percent, reflecting a recent pullback in energy costs.
LOST DECADE, TEN YEARS WAR
As Americans mark the 10th anniversary of the September 11 attacks, they struggle with an economy that continues to leave many workers behind. One particular figure is striking: despite population growth over the last decade, the number of employed Americans was lower in August 2011 -- 131.13 million -- than it was in September 2001, when it stood at 131.52 million.
Some analysts argue that spending on the wars that followed the attacks contributed considerably to a deteriorating fiscal outlook that is now preventing more substantial stimulus measures from being enacted to ward off a potential recession.
A Brown University study published earlier this year pegged the total cost of the wars in Iraq and Afghanistan at close to $4 trillion, nearly 10 times the size of the package Obama proposed last week to spur jobs growth.
Given a perceived shortage of fiscal options, markets have already largely priced in the chance that the Fed will take some sort of action at its September 20-21 meeting, probably through an effort to put additional downward pressure on long-term interest rates.
As for Obama's jobs plan, the reviews were mixed at best -- the Dow's 300-point plunge on Friday was not exactly a vote of confidence. The nervousness was partly due to concerns that the plans on offer were more of the same policies that have failed to rouse growth and partly related to concerns Republicans in Congress would block many of the measures.
(Editing by Dan Grebler)