U.S. Recession May Continue Beyond Next Year, Economists Say

[toomuchtime_]

March 1 (Bloomberg) -- The U.S. recession, now in its 15th month, will probably continue well into 2010 or beyond, several prominent economists wrote in today’s New York Times.

“I find it quite easy to imagine two consecutive years of contraction,” Niall Ferguson, a financial historian at Harvard University, said in one of 11 assessments by economists. “I don’t rule out two more lean years after that,” he said.

U.S. gross domestic product contracted at a 6.2 percent annual pace from October through December, more than economists anticipated and the most since 1982, according to a Feb. 27 report from the Commerce Department. Consumer spending, which comprises about 70 percent of the economy, declined at the fastest pace in almost three decades.

Any “whiffs of growth” this year “are likely to herald a false dawn” because of the poor financial condition of consumers, wrote Stephen Roach, chairman of Morgan Stanley Asia. He predicted the economy won’t begin to expand again until late 2010 or early 2011.

The Standard & Poor’s 500 Index fell to a 12-year low last week as the government stepped in for a third time to keep Citigroup Inc. from failing.

Former Federal Reserve Vice Chairman Alan Blinder and William Poole, former president of the St. Louis Fed, were comparatively optimistic, predicting an upturn late this year.

“Housing must hit bottom at some point,” said Blinder, an economics professor at Princeton University.

Falling prices will restart growth, according to James Grant, the editor of Grant’s Interest Rate Observer.

‘Shovel-Ready Stimulus’

“Today’s low prices, painful though they may be, are the market’s own shovel-ready stimulus,” he wrote. “Before you know it, the stock market and the residential real-estate market, too, will be on their way back up again.”

“Americans love a bargain,” wrote Eric Schmidt, chairman and chief executive of Google Inc., so progress will come with consumers taking advantage of historic buying opportunities.

Still, any recovery will be anemic, many of the economists said.

“While the technical recession could be over by the end of the year, the broader credit cycle will likely remain a significant drag on economic activity well into the next decade,” said George Cooper, author of “The Origin of Financial Crises: Central Banks, Credit Bubbles and the Efficient Market Fallacy.”

After severe banking crises, an economy usually takes four years to return to its previous peak in personal income, according to Carmen Reinhart, an economist at the University of Maryland.

Nouriel Roubini, the New York University professor who predicted the current financial and economic crises, said the recession may last a total of 36 months. It’s possible, he wrote, that the slump, instead of following a typical “U” shape back toward growth, “may turn into a more virulent L-shaped near depression.”

U.S. Recession May Continue Beyond Next Year, Economists Say

 

[wimpy77]

my problem is imo the government is taking to long to fix the banks.

 

[toomuchtime_]

my problem is imo the government is taking to long to fix the banks.

I'm not sure we can fix the financial system any time soon. We can keep the major banks from going broke but it's not clear we can infuse enough capital into the financial system to get a recovery going. Half the credit that went to main street came from sales of debt backed securities and now there is no market for these. My sense is that whenever the recession technically ends, we are in for a long period of very slow growth.

 

[auditor0007]

March 1 (Bloomberg) -- The U.S. recession, now in its 15th month, will probably continue well into 2010 or beyond, several prominent economists wrote in today’s New York Times.

“I find it quite easy to imagine two consecutive years of contraction,” Niall Ferguson, a financial historian at Harvard University, said in one of 11 assessments by economists. “I don’t rule out two more lean years after that,” he said.

U.S. gross domestic product contracted at a 6.2 percent annual pace from October through December, more than economists anticipated and the most since 1982, according to a Feb. 27 report from the Commerce Department. Consumer spending, which comprises about 70 percent of the economy, declined at the fastest pace in almost three decades.

Any “whiffs of growth” this year “are likely to herald a false dawn” because of the poor financial condition of consumers, wrote Stephen Roach, chairman of Morgan Stanley Asia. He predicted the economy won’t begin to expand again until late 2010 or early 2011.

The Standard & Poor’s 500 Index fell to a 12-year low last week as the government stepped in for a third time to keep Citigroup Inc. from failing.

Former Federal Reserve Vice Chairman Alan Blinder and William Poole, former president of the St. Louis Fed, were comparatively optimistic, predicting an upturn late this year.

“Housing must hit bottom at some point,” said Blinder, an economics professor at Princeton University.

Falling prices will restart growth, according to James Grant, the editor of Grant’s Interest Rate Observer.

‘Shovel-Ready Stimulus’

“Today’s low prices, painful though they may be, are the market’s own shovel-ready stimulus,” he wrote. “Before you know it, the stock market and the residential real-estate market, too, will be on their way back up again.”

“Americans love a bargain,” wrote Eric Schmidt, chairman and chief executive of Google Inc., so progress will come with consumers taking advantage of historic buying opportunities.

Still, any recovery will be anemic, many of the economists said.

“While the technical recession could be over by the end of the year, the broader credit cycle will likely remain a significant drag on economic activity well into the next decade,” said George Cooper, author of “The Origin of Financial Crises: Central Banks, Credit Bubbles and the Efficient Market Fallacy.”

After severe banking crises, an economy usually takes four years to return to its previous peak in personal income, according to Carmen Reinhart, an economist at the University of Maryland.

Nouriel Roubini, the New York University professor who predicted the current financial and economic crises, said the recession may last a total of 36 months. It’s possible, he wrote, that the slump, instead of following a typical “U” shape back toward growth, “may turn into a more virulent L-shaped near depression.”

U.S. Recession May Continue Beyond Next Year, Economists Say

Wow, an economist said that? I've been saying that for months. I must be a damn genius. Actually, I've been saying this downturn will last at least four years, maybe longer. When we do come out of the recession, growth will be abysmal at best for quite some time.

Reasoning? The dominant cause of this downturn is the housing crisis. The crisis exists, not because we made a bunch of bad loans, although that is what has made it so devastating, but that we built too many homes. Even if people could get loans, there aren't enough people to fill all these homes to begin with. Add to that the fact that so many are unemployed, and likely even more will be before we see any turnaround, and you are talking about a huge glut of homes.

The real problem that this creates is our inabilitiy to build new homes because we don't need them. We need new home construction to provide jobs to get the ball moving again. Even while we were building all these homes that we didn't need, economic growth was not stellar. The only way to turn this around is to create an influx of new home buyers. There are only two ways to do that. One is to expand immigration, but the people must have good paying jobs to do that, or wait until younger people are in a position to buy as they get older and their incomes increase.

Either way, we're looking at five years minimum and most likely ten before we see real ecomonic growth again. And because we're going in the tank so deeply now, it's going to take a long time just to get back to where we were when all this began. Unemployment will remain above 7% at minimum, for a good number of years and with that, wages will remain flat if they don't decline.

 

[wimpy77]

March 1 (Bloomberg) -- The U.S. recession, now in its 15th month, will probably continue well into 2010 or beyond, several prominent economists wrote in today’s New York Times.

“I find it quite easy to imagine two consecutive years of contraction,” Niall Ferguson, a financial historian at Harvard University, said in one of 11 assessments by economists. “I don’t rule out two more lean years after that,” he said.

U.S. gross domestic product contracted at a 6.2 percent annual pace from October through December, more than economists anticipated and the most since 1982, according to a Feb. 27 report from the Commerce Department. Consumer spending, which comprises about 70 percent of the economy, declined at the fastest pace in almost three decades.

Any “whiffs of growth” this year “are likely to herald a false dawn” because of the poor financial condition of consumers, wrote Stephen Roach, chairman of Morgan Stanley Asia. He predicted the economy won’t begin to expand again until late 2010 or early 2011.

The Standard & Poor’s 500 Index fell to a 12-year low last week as the government stepped in for a third time to keep Citigroup Inc. from failing.

Former Federal Reserve Vice Chairman Alan Blinder and William Poole, former president of the St. Louis Fed, were comparatively optimistic, predicting an upturn late this year.

“Housing must hit bottom at some point,” said Blinder, an economics professor at Princeton University.

Falling prices will restart growth, according to James Grant, the editor of Grant’s Interest Rate Observer.

‘Shovel-Ready Stimulus’

“Today’s low prices, painful though they may be, are the market’s own shovel-ready stimulus,” he wrote. “Before you know it, the stock market and the residential real-estate market, too, will be on their way back up again.”

“Americans love a bargain,” wrote Eric Schmidt, chairman and chief executive of Google Inc., so progress will come with consumers taking advantage of historic buying opportunities.

Still, any recovery will be anemic, many of the economists said.

“While the technical recession could be over by the end of the year, the broader credit cycle will likely remain a significant drag on economic activity well into the next decade,” said George Cooper, author of “The Origin of Financial Crises: Central Banks, Credit Bubbles and the Efficient Market Fallacy.”

After severe banking crises, an economy usually takes four years to return to its previous peak in personal income, according to Carmen Reinhart, an economist at the University of Maryland.

Nouriel Roubini, the New York University professor who predicted the current financial and economic crises, said the recession may last a total of 36 months. It’s possible, he wrote, that the slump, instead of following a typical “U” shape back toward growth, “may turn into a more virulent L-shaped near depression.”

U.S. Recession May Continue Beyond Next Year, Economists Say

Wow, an economist said that? I've been saying that for months. I must be a damn genius. Actually, I've been saying this downturn will last at least four years, maybe longer. When we do come out of the recession, growth will be abysmal at best for quite some time.

Reasoning? The dominant cause of this downturn is the housing crisis. The crisis exists, not because we made a bunch of bad loans, although that is what has made it so devastating, but that we built too many homes. Even if people could get loans, there aren't enough people to fill all these homes to begin with. Add to that the fact that so many are unemployed, and likely even more will be before we see any turnaround, and you are talking about a huge glut of homes.

The real problem that this creates is our inabilitiy to build new homes because we don't need them. We need new home construction to provide jobs to get the ball moving again. Even while we were building all these homes that we didn't need, economic growth was not stellar. The only way to turn this around is to create an influx of new home buyers. There are only two ways to do that. One is to expand immigration, but the people must have good paying jobs to do that, or wait until younger people are in a position to buy as they get older and their incomes increase.

Either way, we're looking at five years minimum and most likely ten before we see real ecomonic growth again. And because we're going in the tank so deeply now, it's going to take a long time just to get back to where we were when all this began. Unemployment will remain above 7% at minimum, for a good number of years and with that, wages will remain flat if they don't decline.

zandi said that he thinks unemployment will be at 7% until 2011.

 

[Terry]

Just in the last two months there have been a lot of layoffs here in Va. The unemployment figure is gained from how many people are collecting unemployment checks. There are many people that will not collect unemployment for any reason, so that figure is usually a tad bit higher than reported.