Recession expected to worsen this year
WASHINGTON - Brace yourself: The recession is projected to worsen this year.
The country stands to lose a sizable chunk of economic activity as consumers at home and abroad retrench in the face of persistent economic troubles. And the US unemployment rate - now 7.6 percent, the highest in more than 16 years - is expected hit a peak of 9 percent this year.
That gloomy outlook came from forecasters in the latest survey by the National Association for Business Economics. The new estimates are roughly in line with other recent projections, including those released last week by the Federal Reserve.
"The steady drumbeat of weak economic and financial market data have made business economists decidedly more pessimistic on the economic outlook for the next several quarters," said NABE president Chris Varvares, head of Macroeconomic Advisers.
All told, Varvares and his fellow forecasters now expect the economy to shrink 1.9 percent this year, a much deeper contraction than the 0.2 percent projected in the fall.
If the new forecast is correct, it would mark the first time since 1991 the economy actually contracted over a full year and would be the worst showing since 1982, when the country had suffered through a severe recession.
Vanishing jobs, shrinking nest eggs, rising foreclosures, and tanking home values have forced Americans to cut back, which in turn has caused businesses to lay off workers and slash costs in other ways, feeding a vicious downward cycle for the economy.
The current recession, which started in December 2007, is posing a major challenge to Washington policy makers, including President Obama and Federal Reserve chairman Ben Bernanke. That's because its root causes - a housing collapse, credit crunch, and financial turmoil - are the worst since the 1930s and don't lend themselves to easy or quick fixes.
"As the news on the economy has darkened, so too, have the forecasts," said Ken Mayland, president of ClearView Economics. "We are suffering a period of maximum stress on the economy."