Feb 24 2009
Welker’s daily links 02/23/2009
Published by Jason Welker at 12:29 am under Daily Links
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Forecasters: Economy worse in ’09, better in ’10
All told, Varvares and his fellow forecasters now expect the economy to shrink by 1.9 percent this year, a much deeper contraction than the 0.2 percent dip projected in the fall.
If the new forecast is correct, it would mark the first time since 1991 the economy actually contracted over a full year and would be the worst showing since 1982, when the country had suffered through a severe recession.
Vanishing jobs, shrinking nest eggs, rising foreclosures and tanking home values have forced American consumers to cut back, which in turn has caused businesses to lay off workers and slash costs in other ways, feeding a vicious downward cycle for the economy.
The current recession, which started in December 2007, is posing a major challenge to Washington policymakers, including President Barack Obama and Fed Chairman Ben Bernanke. That’s because its root causes — a housing collapse, credit crunch and financial turmoil — are the worst since the 1930s and don’t lend themselves to easy or quick fixes.
“As the news on the economy has darkened, so too, have the forecasts,” said Ken Mayland, president of ClearView Economics. “We are suffering a period of maximum stress on the economy.”
The economy is expected to remain feeble this year — even with new efforts by the administration and Congress to provide relief.
Posted from Diigo. The rest of my favorite links are here.
About the author: Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course.
Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this authorRelated posts:
1.9 percent contraction is massive in an economy the size of America. I feel that this recession is going to cause deflation, not just because of the contracting economy but also because people are going to be willing to accept lower wages for their work and companies are willing to charge less for their goods. Households and firms are desperate for money and are willing to charge anything for their services as long as they have some kind of income. Recession is a natural cycle for an economy so no matter what the goverment does it wont stop it they can only weaken it.
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