Economists Predict Recession to End, Job Losses to Continue

The good news is that most economists expect that the ongoing recession will end in the latter part of this year. The bad news is that many Americans are unlikely to notice.

The Blue Chip Economic Indicators monthly survey of business economists, released Friday, found that 86 percent expect that the U.S. economy will begin to recover in the second half of 2009. At the same time, respondents expect that unemployment will continue to climb until well into 2010.

The economists predicted that unemployment will peak at 9.8 percent, up from 8.5 percent currently.

The survey reported that the nation's gross domestic product (GDP) continued to shrink rapidly in the first quarter of the year and predicted that it will continue to shrink at a lower rate before edging slightly higher in the third and fourth quarters. GDP dropped at an annual rate of 6.3 percent in the fourth quarter. The economy has shown a number of encouraging trends lately, with the stock market rising over the past four weeks, increases in home sales and mortgage applications, and businesses reporting declines in excess inventories. Even so, the survey predicted that businesses would continue to downsize workforces for at least another year or more.

"The huge output gap created by the recession implies that unemployment will continue to rise well into 2010," it said.

The recession, now in its 16th month, will be the longest since the Great Depression if it continues just one more month. The current recession officially began in December 2007.

The Blue Chip newsletter is a high-end private subscription service that focuses on economic trends and forecasts. The current survey of 52 private sector economists was conducted April 1-2.