From the Wall Street Journal:
Economy Has Further to Fall, According to Economists’ Survey
Bernanke, Paulson Grades Still Low, Despite Getting Thumbs Up on Bear Deal
By PHIL IZZO
April 10, 2008
The weakening U.S. economy has further to fall, according to the majority of economists in the latest Wall Street Journal forecasting survey.
By a 3-to-1 margin, respondents said the economy is in a recession, and almost three quarters said the economy hasn’t yet hit bottom. “It’s hard to say,” said Lou Crandall of Wrightson ICAP, since “it doesn’t feel like anything we’ve experienced in decades.”
Richard DeKaser of National City Corp. was among the economists who think the nadir has been reached and that the economy will soon start to recover. “First, we’ve begun to see some stabilization in existing- and new-home sales,” he said. “Second, the uncertainties plaguing the credit markets are beginning to narrow. And third, the policy actions taken by the government [the economic stimulus package and Fed rate cuts] will begin to take effect soon.”
Mr. Wyss isn’t convinced. “Home prices are still diving,” he said, adding, “I won’t believe that home sales have stabilized until we see the spring numbers. That’s when activity picks up.” He also suspects that consumer spending will slow further because of the economic turmoil.
Iam Shepherdson of High Frequency Economics agrees. “I expect soft consumption will keep growth way below trend right through next year and I would not be surprised by a soft 2010 either,” he said. “You can’t party for a decade, stop on Saturday and expect the hangover to be gone by Sunday lunchtime so you can go out and start all over again.”
One area supporting the point on consumption is the employment outlook. After three consecutive drops in nonfarm payrolls, the economists now expect the economy to shed 1,625 jobs a month, on average, over the next year. They expect the unemployment rate, now 5.1%, to rise to 5.6% by December. Meanwhile, just 21% of economists expect home prices to hit a bottom this year, while 67% see the bottom in 2009 and 12% say it won’t be until 2010.