Survey: Most Economists Predict Recession Will End In '09

WASHINGTON — More than 90 percent of economists predict the recession will end this year, although the recovery is likely to be bumpy.

That assessment came from leading forecasters in a survey by the National Association for Business Economics released Wednesday. It is generally in line with the outlook from Federal Reserve Chairman Ben Bernanke and his colleagues.

About 74 percent of the forecasters expect the recession _ which started in December 2007 and is the longest since World War II _ to end in the third quarter. Another 19 percent predict the turning point will come in the final three months of this year, and the remaining 7 percent believe the recession will end in the first quarter of 2010.

"While the overall tone remains soft, there are emerging signs that the economy is stabilizing," said NABE president Chris Varvares, head of Macroeconomic Advisers. "The economic recovery is likely to be considerably more moderate than those typically experienced following steep declines."

One of the major forces that plunged the economy into a recession was the financial crisis that struck with force last fall and was the worst since the 1930s. Economists say recoveries after financial crises tend to be slower.

Against that backdrop, unemployment will climb this year even if the economy is rebounding, the NABE forecasters predict. Companies won't be in a rush to hire until they feel certain any recovery is firmly rooted.

For all of this year, the forecasters said the unemployment rate should average 9.1 percent, a big jump from 5.8 percent last year and up from its current quarter-century peak of 8.9 percent. If NABE forecasters are right, it would be the highest since a 9.6 percent rate in 1983, when the country was struggling to recover from a severe recession.

Some forecasters thought the unemployment rate could rise as high as 10.7 percent in the second quarter of next year. The NABE outlook from 45 economists was conducted April 27 through May 11.

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General Motors Corp., chemical company DuPont and Clear Channel Communications Inc. were among the companies announcing mass layoffs during the survey period.

With joblessness rising, consumers _ major shapers of overall economic activity _ likely will stay cautious, making for a tepid turnaround. And given the big bite the recession has taken out of household wealth, notably the values of homes and investment portfolios, consumers probably will stay subdued for some time.

Seventy-one percent of the forecasters believe a more-thrifty consumer will be around for at least the next five years. Americans' personal savings rate edged up to 4.2 percent in March, marking the first time in a decade that the savings rate has been above 4 percent for three straight months.

Even as the NABE forecasters believe the country will emerge from recession later this year, they also predict the economy's overall performance in 2009 will be rotten.

The economy should contract by 2.8 percent this year, the forecasters said in updated projections. That's worse than the 1.9 percent drop they forecast in late February. If they are right, it would mark the worst annual contraction since 1946, when economic activity fell by 11 percent.

Still, the forecasters believe the worst is already behind the country in terms of lost economic activity.

The economy shrank at a 6.1 percent annualized pace in the first three months of this year, on top of a 6.3 percent decline in the final three months of last year, the worst six-month performance in 50 years.

For the current April-June quarter, the NABE forecasters believe the economy will shrink at a pace of 1.8 percent. After that, the economy should start growing again _ at a 0.7 percent pace in the third quarter and a 1.8 percent pace in the fourth quarter.

NABE's growth projections for the third and fourth quarters are lower than those made in late February. The downgrade was based on the expectation that businesses, whose profits and sales were hit hard by the recession, will remain wary of ramping up investment.

President Barack Obama's $787 billion stimulus package of increased government spending and tax cuts, near-zero interest rates ordered by the Fed and government programs to get banks to lend more freely again all factor into the expected economic revival.

Many forecasters also predict that home sales will hit bottom by the middle of this year, another stabilizing factor for the economy.

In an encouraging sign, sales of previously owned home rose 2.9 percent in April as buyers snapped up bargains, the National Association of Realtors reported Wednesday. The median sales price sank to $170,200, a 15.4 percent drop from a year ago. Data on new-home sales is due Thursday.

Next year, the economy should grow by 2 percent, the forecasters said. That was lower than the 2.4 percent growth projected in February.

With a lethargic recovery expected, forecasters predict the Fed won't start boosting interest rates until the second quarter of next year.

Because Fed policymakers expect credit and financial problems to ebb slowly, "the pace of the recovery would continue to be damped in 2010," they said last week.

Comments

[nomoredead]

We are seeing the results of what happens after 10-15 years of Corporate Raiders/Private Equity/Hedge Funds buying up companies, laying off employees, stripping their assets then selling them off at a huge profit.....outsourcing and companies moving overseas.

We have reached the breaking point.

While the wealthy invest in emerging markets and car companies in China.

[absolutetruth09]

Ending is one thing,and growth is another.I see no signs of a catalyst in the near future...CAP and TRADE will hurt both business,and consumers(except for companies Obama owns,GE,Banks)..Universal health care will cost way more than they think,and we will have to buy extra coverage to make up for the plan coverage.These 2 events will cost consumers big time,the poor and lower middle class will be hit the hardest.

[EvilCartman]

20 million jobs will be lost by the end of 2009. The summer will be a big lull with people out of work, but everyone will think "it will get better" meanwhile, while everyone is looking for the good times, 2009 is almost half over. Its going to go by real quick. Then they'll say "oh it will improve in 2010".

[twofish]

A jobless recovery is not a recovery. It's what happens to most people that matters, not whether they can show paper profits by shuttling money between banks and hedge funds.

They must be basing their prediction of 2% growth on the banksters spending their bonuses.

[TParrish]

It is important to remember that while the economy just might begin to get better by the third quarter, unemployment will continue to be high for while longer than that. Reagan's "trickle-down" and GW Bush's tax cuts for the wealthy were advertised as methods to put more money in the pockets of more employers, which would encourage them to hire more people.

Those guys should have spent more time as employers. Employers do not hire more people until sales increase. Actually, even that is not specifically true. When sales increase, employers react cautiously by increasing the workload on their current workforce. They will double it, or triple it. They will only hire new people when sales have increased to the point that not adding workers would cut productivity, and therefore profits. So, employment will be absolutely the last thing to improve.

[absolutetruth09]

Their is no such thing as Trickle down in Economics. Bush cut all the taxes,that Clinton raised. Lowering all taxes would speed up recovery.. Obama has done nothing to start Economy....If you disagree with me (Name 1 Obama policy that will revive the economy and explain how.

[Vinca]

A recovery means people working at full-time jobs. I saw on the internet, that the very richest people had a secret meeting at Rockafellow Center. I wonder what it was about.

[MIKEBC]

The very richest people are from the party that wants america to fail, if things get better then what will neo cons be able to say come 2012?

[Rog49Thomas]

Usually economists work with NBER definitions and concepts. Those look at aggregate GDP and not employment figures.

Many economics statistics and concepts are (sadly) divorced from the reality that the actual people in the economy are living. But that reflects in large part the real focus of our economy.

[dgscol]

This is just blind speculation, intended to get glass-half-full-people to dump money foolishly into the stock market. How do they earn their pay, otherwise?

[Przemyslaw Maniecki]

Recovery is not possible until public consumption jumps back to the prerecessionary years. That won't happen since the credit subsidies bonanza is over. There is too much debt out there both public and government. Another thing to consider is the multiple effect on demand and more job losses as a result of increasing unemployment and underemployment. The only way to bring the economy back on track is to wipe out all the debt and create a sustainable diversified economy that pays living wages and relies less on the delusional theories of free trade. Fair trade yes, free trade no. And you can take that to the bank since I am an economist. This is a bias study. There are more than 45 economists. The majority of them will tell you that these economists need to have their heads checked, if they really are economists as they claim. Meanwhile, communities need to work together on eliminating debt, creating own sources of non-profit community based credit, building sustainable diversified economies, and paying living wages.

[pdeep]

I agree. I would add that the current unpleasantness is due to a large continuing imbalance between production and consumption which was made up for by seemingly endless credit creation. Hopefully, economystics like Summers who have gone on record as saying that current account deficits and public and private debt don't matter will enjoy a spiritual experience as bond holders head for the door.

The Rubin-Summers-Greenspan "New Economy" jobs promised in the 90's are nowhere to be seen. The strong dollar policy of that trio was crafted to benefit money center banks at the expense of the manufacturing - industrial sector. Ironically, the very people who bore the brunt of that policy of world wide labor exploitation and wage equalization are now paying for the results. This also includes workers in many countries who are now unemployed as a result of overcapacity in export-oriented sectors.

econocasts.blogspot.com

[Raster]

Sounds like econo-babble. What are they thinking? More specifically, what are they sniffing?

[dadw5boys]

Tell them it is over and many will believe it is over.

Tell them they have confidence in the economy and many will.

Propaganda always works to a point.

[WonderingNThinking]

Yep.

[Vinca]

As much as i hate to pay more taxes, we need to have a national sales tax. At least the rich will also have to pay it. They have loopholes A-PLENTY.

[Vinca]

We don't like taxes, we don't like to take pills, but sometimes we have to pay more taxes and take more pills.I THINK WE NEED A NATIONAL SALES TAX. Our gov. desperately needs more revenue.

[Navision]

You have to put people to work first.

It's about JOBS, Jobs, and more JOBS

[darkmane]

Are these the same economists who were blind sided by the economic crisis?

[FogBelter]

Bingo