Economists wary of economic progress

February 23, 2009 7:02:45 PM PST
Things are likely to get worse before they get better. A leading group of economic forecasters is weighing in with their predictions.

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The National Association for Business Economics was the group the government first relied on to declare the country was indeed in a recession, and it had been since December of 2007.

The economic pain on Main Street is mounting along with the for lease signs.

"We want it to get better and hopefully it will sooner rather than later," said one business owner.

NABE predicts the recession will get worse before it gets better but does forecast a recovery is on the horizon.

Anne Wenzel is president of the San Francisco chapter of NABE. She says the federal stimulus package and infrastructure investment will make a difference.

"The fact that we've got projects ready to go and that Congress acted really quickly is what's going to help the economy the second half of this year," said Wenzel.

A survey of nearly 50 forecasters with NABE produced a chart for anticipated changes in gross domestic product.

Following a sharp contraction in the first quarter of this year, and a drop in the second quarter, the trend is for recovery on the back half of this year and into 2010.

"It's very similar to private investment. It's very productive investment so the emphasis on infrastructure spending is really smart spending and will benefit the economy for several years out," said Wenzel.

NABE has some other predictions: unemployment which is now 7.6 percent will peak by the end of next year at nine percent, retail prices will go down this year-lower by almost a percent and corporate profits will fall by more than nine percent this year.

With all of that, some economic scholars at San Jose State University see a more prolonged downturn.

"Any recovery we have does hinge on what the individuals is doing, not what the government is doing but the individuals doing and that will be based on the individuals confidence is what the economy holds for them personally," said SJSU economics professor Colleen Haight.

But if the stimulus package does put people back to work, consumer confidence and spending will increase. Small business owner John Tyson says that's all he needs to get the ball rolling in the right direction.

"Once they spend, I can buy new things and when I buy new things, the factories can create new stuff," said Tyson.

The cycle of recovery depends on people getting back to work, and feeling good about their personal finances. Many economists say it strictly depends on the banking sector finding some solid ground, and is still a big uncertainty.

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