Yesterday White House economic advisor Lawrence Summers expressed cautious optimism that the sense that the American economy is in free-fall would abate within the next few months. Now a survey of 53 economists by The Wall Street Journal (subscription required) shows that this group shares his opinion. Those surveyed generally expect the recession to end in September and begin the long slog back to recovery.
Between now and then, however, the experts believe the GDP will continue to tumble, 5 percent in the first quarter, 1.8 percent in the second. Few of them see the unemployment rate, which usually trails recovery, improving before mid-summer of next year, although they expect the rate of new job loss to slow considerably to 2.6 million in the next year. According to the Bureau of Labor Statistics, from December of 2007 to March of this year, 5.1 million jobs have been lost, 3.3 million of those taking place since the beginning of November 2008.
The economists point to pent-up demand by companies that have depleted their inventories, as well as the longed-for loosening of credit as a result of the TARP money, as major contributors to the improved outlook. Other stimulus expenditures are also expected to help bolster the economy. Almost three-quarters of the respondents are sanguine about the Treasury's plan to buy up toxic assets.
The 53 generally approved of the Fed Chairman Ben Bernanke's work, grading him at 76 percent, while the President and Treasury Secretary Geithner were each given C's.
Flies in the ointment that the economists foresaw included the credit market's reluctance to loosen up further, consumer unwillingness to resume shopping, and the possibility that one or more large financial institutions may yet implode.
Other studies suggest that this outlook -- if not optimistic, at least less pessimistic -- is shared widely. The Consumer Confidence Survey in March checked a steady downward trend, actually increasing from 27.3 to 28.9. The Conference Board's Measure of CEO Confidence was also up in the first quarter from its all-time low. Although still pessimistic, 17 percent of CEOs expect the economy to improve by the end of the third quarter vs. 11 percent last quarter.
Perhaps these cracks in the veneer of gloom hovering over the economy will serve as the first step toward reviving public confidence. The hint of spring in the air makes it easier to embrace optimism, but we still seem to be a long, hot summer away from the tipping point.