Posted on 01/27/2008 11:20:21 AM PST by Freedom_Is_Not_Free
The recession in housing has spilled over to the rest of the economy, in our view. We now expect an outright contraction in economic activity in the first three quarters of 2008. This downturn should be led by consumer spending.
GDP is expected to average 0.8% in 2008 (was 1.6% before) and only pick up to 1.0% in 2009, in spite of $175bn in fiscal stimulus and aggressive easing of monetary policy by the Federal Reserve. As we saw in prior post-bubble de-leveraging episodes, the healing process takes time as the bad debts get extinguished and balance sheets repaired.
Home prices are expected to decline by 15% in 2008 and by a further 10% in 2009, with more depreciation likely beyond the forecast period. The inventory situation has become intractable and home prices are still far above historical norms when benchmarked against other measures such as rent or GDP. Housing starts will probably slide another 30% from current levels, to 700k by the end of 2008 – a historic low needed to clear inventories amid the worst housing financial crisis in decades.
We anticipate job losses in the range of 2.5 million, close to what we saw in the last recession. This in turn is expected to push the unemployment rate up to 5.75 by the end of 2008 and to 6% by early 2009.
Rising unemployment, $6 trillion in lost housing wealth combined with slumping equity valuations, and the lack of participation from the baby boomers for the first time in three decades will result in the worst consumer recession since 1980.
(Excerpt) Read more at cfcr.ml.com ...
sounds rather harmless when put that way.
FYI ping
Seems reasonable.
Paul Krugman, the Princeton Pansy, is yelling that tax cuts won’t help. Tax increases will help since government can provide jobs and benefits.
Yup, it has never worked from FDR to Clinton. But Krugman and the Dems KNOW BETTER.
Oh, not to worry. We’re all getting those big gub’mint checks that will save us from this doom! /s
Funny how the MSM embraces Regan's trickle down theory for the negatives, but never the positives.
It used to be that economists considered 6% unemployment to be full employment (due to “friction” in the labor pool — people changing jobs, etc.). Now it’s what we find at the bottom of a recession.
lol
The downturn will end in August when we each get our $300 to spend on ANYTHING we want. People are already plannng to use it to make the downpayment on a new McMansion and BMW with a Mac in the trunk and iPhone in the front seat.
I don’t believe it. I think this is overly pessimistic, just in time for Super Tuesday.
I think any economic report that uses the term ‘sink’ in it, is probably not worth reading. I would expect more from a serious analysis.
I hope my property taxes are decreased. If it affects me that way, I’ll be a happy camper.
I think high gas prices, the influx of illegals, and the “trade agreements” destroyed the economy and possibly the American standard of living.
One door closes; another opens. Americans are resilient as long as we remain optimistic.
Not good. These reports are always cautious. So, if this is their idea of caution, then we’re in for a bumpy ride.
True, so true. But I can’t find a mutual fund that has derivatives available to short the downturn in our economy and go long on the coming tax increases.
What’s going to happen to all the illegals who were constructing all the houses now that houses will not be built?
I remember the summer of 1982 when unemployment was over 10% and I was glad to get a one-month minimum wage job.
America is being hollowed out by exporting its wealth. America’s trade deals are scattering its seed corn throughout the world by exporting jobs, factories, companies, ownership, dollars and Treasuries. Add to the that the zillions being used to bring democracy to the ME.
The Washington response to print money will only increase the sale of wheelbarrows which we will have to import from China.
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