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WORLD> America
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When US economy bottoms out, how will we know?
(Agencies)
Updated: 2009-03-08 11:39 When will this wretched economy bottom out? The recession is already in its 15th month, making it longer than all but two downturns since World War II. For now, everything seems to be getting worse: The Dow is in free fall, jobs are vanishing every day, and one in eight American homeowners is in foreclosure or behind on payments. But the economy always recovers. It runs in cycles, and economists are watching an array of statistics, some of them buried deep beneath the headlines, to spot the turning point. The Associated Press examined three markets -- housing, jobs and stocks -- and asked experts where things stand and how to know when they've hit bottom. None of them expects it to come anytime soon. Jobs HOW BAD IS IT?: The US unemployment rate hit 8.1 percent in February, a 25-year peak. The nation has lost 4.4 million jobs since the recession began in late 2007.
The job cuts began early last year, as the housing and construction industries slowed down. The collapse of the financial industry in the fall battered white-collar workers. Soon, layoffs spread across industries and income levels. HOW MUCH WORSE COULD IT GET? The darkest days for the job market are almost certainly still ahead. With spending weak and credit markets stalled, experts think the economy will probably shed a total of 2.4 million jobs this year. That would mean an unemployment rate above 9 percent. That would easily surpass the 2001 and 1990-91 recessions but trail the 10.8 percent rate of December 1982. Those expectations could be optimistic: The government's "stress tests" to check the strength of banks' balance sheets assume a 10.3 percent rate. The job market will probably be weak for years, even if the economy starts to turn around next year. The unemployment rate may not fall back to its pre-recession level of 5 percent until 2013, according to Moody's Economy.com. WHERE'S THE BOTTOM?: Economist Sophia Koropeckyj, a managing director at Moody's Economy.com, is keeping an eye out for two signs, an inching up in companies hiring temporary workers and a rise in the number of hours worked by those who have managed to keep their part-time and full-time jobs. When business conditions improve, employers hire temporary workers first, she said, and a pickup in permanent hiring wouldn't be far behind. Koropeckyj estimated that could come in mid-2010. |
