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Economists Say Recession To End In Third Quarter

WEST COVINA – More than 90 percent of economists predict the recession will end this year, according to a closely watched assessment of the economy released Wednesday. But the way back to economic health won’t be easy, economists, businesses owners and the unemployed said.

About 74 percent of forecasters from the National Association for Business Economics expect the recession – which started in December 2007 and is the longest since World War II – to end in the third quarter. Another 19 percent predict the turning point will come in the final three months of this year, and the remaining 7 percent believe the recession will end in the first quarter of next year.

“While the overall tone remains soft, there are emerging signs that the economy is stabilizing,” said NABE president Chris Varvares, head of Macroeconomic Advisers. “The economic recovery is likely to be considerably more moderate than those typically experienced following steep declines.”

Despite risks of continuing job losses, frozen credit, declining home values and cautious consumers, the 45 professional forecasters surveyed said the worst was likely over.

The economy shrank at a 6.1 percent annualized pace in the first three months of this year, on top of a 6.3 percent decline in the final three months of last year, the worst six-month performance in 50 years.

It’s good news for Robert Myers, who with his wife Karen owns Karen’s Hallmark Shop in Altadena.

“That Advertisement would would be nice,” Robert Myers said. “In our situation, the sooner this recession ends, the better.”

Like many businesses, the Myers felt the severest pinch in December and January, forcing them to cut hours, close earlier and offer special deals to stay afloat.

For the current April-June quarter, the NABE forecasters believe the economy will shrink at a pace of 1.8 percent. After that, the economy should start growing again – at a 0.7 percent pace in the third quarter and a 1.8 percent pace in the fourth quarter.

The Myers have seen some glimmers of hope lately.

Sales have picked up over the last month, Robert Myers said. Not only are customers buying more cards, they are spending more per visit, he said.

“In the meantime, we’re doing all we can to hang in there,” he said.

For many businesses, hanging in there these days means cutting back on investment, and that is what will keep the economy weak in the short-term, said NABE economists, who were surveyed from April 27 to May 11.

In the longer term, President Barack Obama’s $787 billion stimulus package of increased government spending and tax cuts, coupled with predictions that the housing market will hit bottom in the summer, gave economists a rosy outlook.

Even with that outlook, recruiters aren’t likely to come knocking on job-seekers’ doors any time soon.

Joblessness will continue to rise beyond the third quarter, despite an economic turnaround, forecasters said. The unemployment rate should average 9.1 throughout the year, and could leap to 10.7 percent by the second quarter of next year, according to the survey results.

“It’s one the last things to turn around,” said Sven Arndt, professor of Money, Credit and Trade at Claremont McKenna’s Robert Day School of Economics and Finance.

As the economy turns around, companies looking to bolster downsized inventories will eventually begin hiring again, Arndt said.

That may be a while, said Edwin Duterte, an unemployed commercial real estate lender who started Pinkslip Mixers, a networking event for unemployment professionals.

“They have to catch up. They have to make sure their profits are generating enough revenue to cover the staff they are going to hire,” he said.

The Associated Press contributed to this story.

(Whittier Daily News)