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Economists Predict Worst Postwar Recession Ever

Published 11/13/08 Dustin Ensinger - Print Article
E-mail - editor@economyincisis.org

A recent survey of leading economists by Bloomberg News painted a very bleak outlook for the near future of the U.S. economy, finding that the current recession will be the longest in three decades.

According to the survey, economists expected the economy to shrink at an annual rate of three percent for the final quarter of 2008 and shrink another 1.5 percent the first quarter of 2009.

``The economy fell off a cliff in October,'' said Richard Berner, co-head of global economics at Morgan Stanley in New York. ``We had a huge financial shock that intensified the credit crunch and triggered a sharp downturn.''

In addition, households are making a concerted effort to rein in spending, a trend that will have serious long-term ramifications as consumer spending accounts for two-thirds of economic activity. Economists predict that for the first time since WWII, consumer spending will decline for three consecutive quarters.

If that is indeed the case, unemployment will continue to rise. Economists predict that unemployment may rise to 7.7 percent by the end of 2009.

``We're in for a pretty serious recession,'' Jeffrey Frankel, a member of the business-cycle dating committee of the National Bureau of Economic Research, said in a Nov. 10 interview with Bloomberg Television. ``There's a chance it'll be the worst postwar recession.''

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Source Bloomberg:

The implosion of credit markets last month will cause the economy to shrink at a 3 percent annual rate in the fourth quarter and decline at a 1.5 percent pace in the first three months of 2009, according to the median estimate of 59 economists surveyed Nov. 3 to Nov. 11. Following last quarter's 0.3 percent drop, the slump would be the longest since 1974-75.

…

Declines in household spending will extend into next year as the worst financial crisis in seven decades forces employers to keep cutting payrolls on top of the 1.2 million jobs already lost this year. President-elect Barack Obama has said the U.S. needs a second economic stimulus package ``sooner rather than later.''

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