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The Recession Will End… in 2010

Says who: Ben Bernanke

“FOMC participants generally expect that, after declining in the first half of this year, output will increase slightly over the remainder of 2009. The recovery is expected to be gradual in 2010, with some acceleration in activity in 2011.” (via Federal Reserve testimony)

Why it might be false: Even if output, the total value of all goods and services the country produces, does increase before the end of this year, it won’t really matter unless someone actually buys all that stuff. With overwhelming indicators for a jobless recovery, including a recent USA TODAY survey of 49 economists projecting the jobless rate peak at 10.2% in 2010, income for spending may be scarce.

Why it could be true: Positive output is always better than not producing any goods or services at all. Gradual improvement over time isn’t a major surprise. With all the bubbles in the economy—credit and housing—of course the recovery is going to be gradual. These problems took years to take hold, so it’s pretty obvious that anything less than a miraculous stimulus will clearly take time. Given some of the lackluster results of the stimulus to date, we may be on stimulus #5 before the end of this year.

Our call:  We’ll buy it. Even if U.S. consumers can’t shop, the Chinese dragon is already starting to breathe growth back into the global economy and can start a shopping momentum into 2010 and beyond. Other signs are looking up, too – housing starts and rising home sales, for two. By early 2010, President Obama’s stimulus plan will have had almost a year to kick into gear. Between the start of a shopping spree of U.S. goods in China and more time for the stimulus to stimulate, and just about every economist in the world pointing to recovery in 2010 (including Dr. Doom, Nouriel Roubini), Bernanke’s prediction isn’t too crazy.

Tags: economists, economy, recession, recovery, The Recession Will End...