A prolonged economic contraction and rising unemployment rate were part of an outlook report released this morning by the National Association for Business Economics, a closely watched group of economists. Most NABE members say the economy is in a full-fledged recession.
(The National Bureau of Economic Research, the official “recession referees,” have yet to make an official call on the status of the economy. The NBER web site does have an interesting report on economic cycles dating back to December 1854.)
“Business economists became decidedly more negative on the economic outlook for the next several quarters as a result of the intensification of credit market stresses and evidence of spillover to the real economy," said NABE President Chris Varvares, president, Macroeconomic Advisers, in the press statement.
Highlights (or lowlights) of the NABE report were:
• The NABE panel dramatically trimmed growth expectations for both the remainder of this year and 2009.
• A dimmer outlook for consumer spending accounted for most of the downward revisions to the overall economic outlook, reflecting a worse outlook for household wealth and income. For example, the projected value for the S&P 500 index at the end of 2009 was lowered 17 percent.
• 96 percent of the NABE panelists believe that a recession has begun. Half of the panel estimates that the recession started in the fourth quarter of 2007 or in the first quarter of 2008
• Just over 60 percent of the NABE respondents expect that the depth of the recession should be relatively contained, with a peak-to-trough decline in real GDP of less than 1.5%, with the balance expecting a harsher contraction.
• The jobless rate is expected to rise to 7.5% by year-end, 2009.
• Lower inflation is predicted to coincide with increased economic slack.