Sunday, March 08, 2009

When Will the Recession Be Over?

To find out what 11 experts said last week in the NY Times go to When Will the Recession Be Over?. The experts include economics professors (one Nobel prize winner) and private sector executives. Here is the one from Alan Blinder (all entries are about this link):

"It Can’t Last Forever

HERE’S the hard truth: Nobody knows when this recession will end. Economic forecasting is a dark art, and predicting when recessions begin and end is its weakest link. That said, my best guess is that growth will return in the fourth quarter of this year. Why?

First, recessions don’t last forever. If the economy continues to slide through the third quarter, as I anticipate it will, this will be the longest American recession since World War II. Housing must hit bottom at some point. For several years now, declining expenditures on homebuilding have subtracted roughly a percentage point from gross domestic product growth. The change from minus 1 percent to (at least) zero will add a full point to growth. Auto sales are also not likely to keep falling at recent rates. Second, Washington’s large economic stimulus should add more than 5 percent to real gross domestic product over two years.

Third, the price of oil plummeted from a peak of around $145 a barrel last summer to around $40 a barrel today. Since the $145 price was fleeting, let’s call the “true” decline from $100 to $40, which means the bill Americans pay for imported oil fell by about $300 billion dollars a year.

But here’s the rub. My forecast assumes that no other (big) shoes will drop. Sad to say, shoes have been dropping like rain.

Alan S. Blinder is a professor of economics and public affairs at Princeton and a former vice chairman of the Federal Reserve."


Cyril Morong said...
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Anonymous said...

I am confident the market will not correct itself in an expedient manner. If the stimulus plan never went into effect, there would be many firms collapsing around us. Similar to: Lehman, Bear Stearns, Circuit City and AIG would have been gone a long time ago. Many skilled laborers out of work, with potential entrepreneurs trying to obtain capital with no success. I believe this will be the longest recession since WWII and we may not recover from it this until the Q1 or Q2 of 2010.