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The world's largest economy is on pace to record its longest recession since 1947, a survey released Wednesday predicted.
A decline in consumer spending will push U.S. GDP down 2.4% in Q1 2009, and another 0.5% in Q2 2009, according to 51 economists surveyed by Bloomberg News.
If the above occurs, it would be the longest U.S. recession since 1947, so says economist Richard Felson, who did not participate in the Bloomberg survey.
"It would be a truly negative circumstance, the weakest economic conditions since the end of World War II and the weakest job market conditions since the 1981-1982 Reagan recession," Felson said. "A Q3 2009 recovery would give us a 20-22 month long recession, which is just dreadful. But you can understand why, with housing, manufacturing, exports, business investment, and consumer spending all trending in the wrong direction. It would be the 'mother of all contractions.' "
Further, with the weak aforementioned demand characteristics, the economists surveyed by Bloomberg News expect the U.S. unemployment rate to soar to 8.2% by the end of next year, up from the current 6.7%.
An 8.2% unemployment rate "would be very bad news for corporate revenue and earnings, and the stock market, in addition to increasing social service costs of the states," Felson said.
"I can't see the Dow or the stock market generating much momentum, certainly not for the first half of 2009, if these forecasts prove to be accurate," Felson said. "Say what you will about the auto bailout, it has to pass in some form, as adding another 500,000 workers to the unemployment roles would only deepen the recession. Those workers have to be employed in some way, even if they're sweeping streets and clearing debris from vacant lots."
Congressional lawmakers are expected to begin debate on a $15 billion rescue for General Motors (NYSE: GM), Ford (NYSE: F), and Chrysler in a day or so, Bloomberg News reported Wednesday.
Felson said that given the seriousness of the U.S. contraction, the nation has to think in terms of "a large and continual program to provide fiscal stimulus to make-up for declines in business investment and consumer spending." His recommendation: $600 billion in January 2009, followed by $500 billion in April 2009, and another $300-500 billion in July 2009, if the U.S. economy is not a sustainable growth track.
Economic Analysis: An 8.2% unemployment rate would have widespread economic and social ramifications. Further, the augmented rate, which includes discouraged workers currently not counted in the official unemployment rate, would soar above 15% -- meaning that about one out every six Americans would be unemployed. The view from here argues that would extend the bear market through at least Q2 2009, with the Dow likely plunging to new lows in the 6,500 to 7,000 range.
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Reader Comments (Page 2 of 2)
12-11-2008 @ 11:31AM
Michael said...
Recession is when the very rich sit on their money and watch the rest of us struggle, then when it has pulled everything down far enough to make people feel inferior to them, they will make things move in the direction they want, with them even richer of course.
12-11-2008 @ 12:14PM
Mike said...
With Obama at the helm? Try 1929.
12-11-2008 @ 11:56AM
grandma said...
In greece, these are young strong teenagers try to get food and supplies for their parents and grandparents, is that what we want to happen here..........
12-11-2008 @ 12:22PM
perry said...
Craig your an idiot. You base the whole auto industry on your wifes rental. What a fool....
12-11-2008 @ 1:03PM
Marty said...
Quit crying and lieing, The U.S. automobile is one of the best. I've over 200000 miles on an 2002. I still trust it. Those who are spewing venom are jealous of what the autoworkers have achieved thru their union. most workers could do a lot better if they had the courage to stand up and claim that which we are entitled as americans.We must give the american worker a better opportunity to organize with the Free Choice legslation. We must stary supporting american workers and the american workers standard of living. Quit selling out our brother and sister citizens.
12-11-2008 @ 1:30PM
jhg said...
i wish i would've seen this coming BEFORE i opened a business,this is worse than '82,could use a bail out myself
12-11-2008 @ 2:30PM
Kent said...
If you look at economic data, we were really in recession that lasted from the second term of Richard Nixon through Ford and Carter and into the first 2 years of the Reagan administration.
Things improved enough in 1976 and again in 1980 that we tend to see 3 separate economic downturns, rather than one that lasted more than 10 years.
12-12-2008 @ 9:08PM
SANTA said...
CHRYSLER LAY OFF IN DEC. TOO JAN. CUTTING BACK SAME AS GM FORD AND HONDA -VW AND THE REST OF-NON-" USA "- YES THEY GOT MONEY FROM "US "AND THERE COUNTRYS TOO...DAH.THE MONEY THAT THE NON-USA- COMPANYS GET THEY DO NOT KEEP IT HERE THEY PUT IT IN THRE BANKS DAH....SO WAKE UP...DO YOU KNOW HOW MANY MILLIONS THEY GOT FROM OUR GOOD OLD USA?WELL YOUR MONEY AND DO NOT HAVE TO PAY BACK??BET NOT AND HOW MUCH THEY GOT FROM THERE COUNTRYS?BET NOT.SO WHEN ITS USA AUTO COMPANYS NEED HELP EVERBODY CRYS...,HOW SAD ITS A LOAN DAH.SO IF THEY JUST LAY THEM ALL OFF WE ALL WOULD BE OUT OF A JOB..DAH..MERRY X-MAS...
12-13-2008 @ 8:33PM
tommy said...
"We have, in this country, one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board. This evil institution has impoverished the people of the United States and has practically bankrupted our government. It has done this through the corrupt practices of the moneyed vultures who control it." -- Congressman Louis T. McFadden in 1932 (Rep. Pa)
"The Federal Reserve banks are one of the most corrupt institutions the world has ever seen. There is not a man within the sound of my voice who does not know that this nation is run by the International bankers." -- Congressman Louis T. McFadden (Rep. Pa)
"Some [Most] people think the Federal Reserve Banks are the United States government's institutions. They are not government institutions. They are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign swindlers." -- Congressional Record 12595-12603 -- Louis T. McFadden, Chairman of the Committee on Banking and Currency (12 years) June 10, 1932