Squeezing Spending

"Consumption is down because debt repayments are squeezing spending even this long after the crisis," Hall said. "It will be a painful process until debt-dependent consumers are back on their feet."

Manufacturers are restraining production in response to weak consumer demand. Manufacturing in the U.S. almost stalled in July, a report from the Institute for Supply Management showed Aug. 1.

The unemployment rate probably stayed at 9.2 percent in July as payrolls climbed by 85,000 workers, according to a Bloomberg News survey ahead of the Labor Department's Aug. 5 report. Through June, the economy recovered about 1.77 million of the 8.75 million jobs lost as a result of the 18-month recession that began in December 2007.

"We certainly are in a more vulnerable situation now," and a new shock could spark a downturn, similar to the contraction after oil prices jumped with Iraq's invasion of Kuwait in 1990, said James Stock, a Harvard economist on the NBER panel. "Looking around the world, it is sure possible to think of shocks of the Kuwait magnitude that could tip us over the edge."

Debt-Limit Debate

Business confidence has been shaken by the months-long debate over raising the debt ceiling, Stock said.

President Barack Obama yesterday signed a debt-limit compromise that prevents a U.S. default on the day the Treasury Department had warned the nation's borrowing authority would expire. The measure raises the nation's debt ceiling until 2013 and threatens automatic spending cuts to enforce $2.4 trillion in spending reductions over the next 10 years.

"The U.S. debt ceiling debate has, I think, really eroded confidence among consumers and businesses in addition to creating uncertainty," Stock said in an interview. "The resolution of uncertainty with the compromise doesn't restore with it the view of legislative competence in economic management."

Cutbacks in government spending will be a drag on growth next year, said Jeffrey Frankel, another Harvard professor on the NBER committee. While recession risks have risen, they are "not necessarily enough to push the probability over one half."

Stimulus Withdrawn

"The government is a source of contraction this year," Frankel said. "Fiscal stimulus is being withdrawn at the federal, state, and local levels."