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Economists Say Worst Of Recession Over

Rising federal debt could be a problem, however

By Mark Huffman
ConsumerAffairs.com

October 12, 2009

"The survey found that the vast majority of business economists believe that the recession has ended but that the economic recovery is likely to be more moderate than those typically experienced following steep declines. The NABE panel upgraded the economic outlook for the next several quarters, compared with the previous survey," said NABE President-elect Lynn Reaser, chief economist at Point Loma Nazarene University.

The survey of 44 professional economists specializing in forecasting found that 80 percent think the U.S. economy is growing again after four quarters of declines. Technically, the recession will not be over until the economy experiences two consecutive quarters of positive growth.

Following a sharp 6.4 percent contraction in the first quarter of this year and another 0.7 percent drop in the second quarter, NABE forecasters expect real GDP to rise at an above trend 2.9 percent rate in the second half, Reaser said.

Reaser also predicted the more-than-three-year downturn in the housing market is very close to coming to an end, with substantial growth expected for next year.

According to the survey, the key areas of concern involve the large increases in federal debt and unemployment rates that are expected to remain very high through next year. The unemployment rate is forecast to rise to 10 percent in the first quarter of next year and edge down to 9.5 percent by the end of 2010.

Inflation is expected to remain contained throughout 2010.

"The good news is that this deep and long recession appears to be over, and with improving credit markets, the U.S. economy can return to solid growth next year without worry about rising inflation," Reaser said.

The current recession started in December 2007 and is the longest and deepest since the 1930s. It escalated to crises mode a year ago, following the bankruptcy of Wall Street titan Lehman Brothers and the resulting credit collapse.

The beginning of the recession coincided with an escalation in gasoline prices, that peaked at more than $4 a gallon in July 2008. This rise in gas prices is credited by some economists -- more so than the sudden credit crises -- with contributing most to the recession.

The recession also worsened over the last 12 months when businesses slashed their inventories and cut payrolls to cope with both the recession and the credit freeze. Economists say the so-far meager recover has been fueled not by consumers, but by businesses slowly replenishing their inventories.

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