Forecasters boost odds of recession in U.S. over next year: survey.
Economic forecasters are boosting the odds that the United States will slide into recession in the next 12 months as the housing slump deepens and the credit crisis continues, the Wall Street Journal reported in its online edition Wednesday.
The latest WSJ.com survey of economists, conducted in the days following the gloomy Sept. 7 employment report, pegged the recession risk at 36 percent, up from a 28 percent probability a month earlier, the report said.
Three-fourths of the 52 economists responding to the recession question put the odds at or above 30 percent and 11 put the odds at 50 percent or better. The range was wide -- from 5 percent to 90 percent.
Only one out of eight economists say the credit crisis, with related market turmoil, has mostly run its course. About 60 percent say it is about half over, with the rest saying it is in the early stages, the survey shows.
The economists' most likely case is for substantially slower growth. On average, they project fourth-quarter gross domestic product to rise at a 1.9 percent annual rate, well below the 2.5 percent they estimated a month earlier. Growth in the first quarter of 2008 is seen at 2.1 percent, down from an earlier average estimate of 2.6 percent.
The economists on average expect the nation's unemployment rate to hit 4.8 percent by this December -- up from 4.6 percent now -- and 4.9 percent by next June. Less than half -- 22 out of 55 economists -- see unemployment at or above 5 percent by December 2008.
Nonfarm payrolls are estimated to grow almost 83,000 a month on average over the next year, well below projected growth of more than 108,000 jobs in the August WSJ.com survey. Projections ranged from an average monthly drop of 30,000 jobs to a monthly gain of 173,000 jobs, the report said.
About 85 percent of forecasters said economic conditions warrant a cut in interest rates by the Federal Reserve.
The forecasters expect a series of rate cuts that would bring the benchmark federal funds rate to about 4.5 percent by the middle of next year.
Three out of four economists said the Fed helped cause the latest credit market turmoil by setting interest rates too low for too long this decade, the Journal said.