Economists Say Recession To Last Through 2009

Washington, DC, Nov. 3, 2008–Most top economists believe the economy has fallen into a recession that will continue through next year.

According to the National Association of Business Economists, 90% of the 102 members responding to a survey were more pessimistic about the economy than they had been in July.

The economists indicated that a recession is likely to continue at least through the end of next year, with 79% saying the economy will grow less than 1% and 38% saying the economy will shrink next year.

“There has been a sharp decline in current and near-term expectations among economists,” said Ken Simonson, a member of the NABE committee that conducted the survey. “This represents a big turnabout in attitude about the economy.”

Just 36% of respondents said interest rate cuts and other initiatives by the Fed to unfreeze the credit markets were having a positive impact and 58% said the programs were having little impact. The survey was completed on Oct. 23, before the Fed’s last rate cut.

“Economists have a very pessimistic view of the Fed’s programs,” said Simonson. “The inability to get funding has lowered their near-term expectations for the economy.”

Low consumer sentiment and poor economic conditions have sharply reduced demand for goods and services. According to the survey, 35% reported falling demand while just 30% said demand was rising. It was the first time since 2001 in which more respondents reported declining demand than rising demand.

Continued job cuts are also likely, as 23% of respondents said their firms or industries were cutting jobs, compared to 16% who reported that they were hiring.

“Over the next six months, far more firms expect to cut back on employment, which will likely make the recession deeper,” Simonson said.