The U.S. recession will be the worst in more than three decades as job losses mount and consumers and companies retrench, a survey of business economists showed, Bloomberg reported.
The world's largest economy will shrink by 1.9 percent this year and a total of 2.8 percent in the current downturn, the most since the 1973-75 slump, according to the median estimate in a poll taken by the National Association for Business Economics. Another 3.2 million Americans will be cut from payrolls in 2009, pushing unemployment to 9 percent by year-end, NABE said.
The prospects for spending and output grew darker compared with the group's November survey, today's report showed. Eight out of 10 economists projected the stimulus plan signed into law last week by President Barack Obama would contribute at most a 1 percentage-point boost to gross domestic product this year.
"The steady drumbeat of weak economic and financial-market data have made business economists decidedly more pessimistic," Chris Varvares, president of both the group and of Macroeconomic Advisers LLC in St. Louis, said in a statement. "A meaningful recovery is not expected to take hold until next year."
The federal budget deficit will swell to a record $1.5 trillion in the fiscal year ending in September, from $455 billion in the previous 12 months, the survey showed. The gap will probably be $1.1 trillion next year, NABE economists said.
Spending to Fall
Consumer spending, which accounts for more than 70 percent of the economy, is projected to decline 1.3 percent this year, compared with a 0.2 percent drop forecast in the November survey.
Economists cut 2009 projections for auto sales to 10.9 million from the 12.5 million projected in November.
Builders will break ground on 630,000 homes this year, the fewest in 50 years of record-keeping and less than the 870,000 starts projected in the November poll. Still, participants predicted home sales would reach a trough by the middle of the year.
The cost of living will decline 0.8 percent in 2009 as the benefit of lower raw-material expenses is passed through to consumers, the NABE report indicated. With inflation evaporating and the economy in recession, Federal Reserve policy makers will keep the benchmark interest rate close to zero all year, the NABE economists said.
On a quarterly basis, the economy will shrink 5 percent in the first three months of 2009 and contract 1.7 percent from April to June, before turning to growth of 1.6 percent in the second half of the year, NABE predicted.
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