Recession over, unemployment seen at 10 percent

By Lucia Mutikani

WASHINGTON (Reuters) - The worst U.S. recession since the Great Depression has ended, but weak household spending as the labor market struggles to create jobs will slow the pace of the economy's recovery, according to a survey released on Monday.

The survey of 44 professional forecasters released by the National Association for Business Economics, also known as the NABE, found that 80 percent of the respondents believed the economy was growing again after four straight quarters of declines.

"The great recession is over," NABE President-Elect Lynn Reaser said.

"The vast majority of business economists believe that the recession has ended, but that the economic recovery is likely to be more moderate than those typically experienced following steep declines."

Recessions in the United States are dated by the National Bureau of Economic Research. The private-sector group, which does not define a recession as two consecutive quarters of decline in real gross domestic product, often takes months to make determinations.

The recession that started in December 2007 is the longest and deepest since the 1930s. It was triggered by the U.S. housing market's collapse and the ensuing global credit crisis.

While the economy is believed to have rebounded in the third quarter, analysts believe that ordinary Americans will probably not see much difference as unemployment will remain high well into 2010, restraining consumption.

"We don't necessarily expect the U.S. economy to fall into a double-dip recession. This time round, consumers will be reluctant to join the party," said Paul Ashworth, senior U.S. economist at Capital Economics in Toronto.

The NABE survey, conducted in September, predicted real GDP growth expanding at an annual pace of 2.9 percent over the second half of this year. Output for all of 2009 is expected to contract 2.5 percent and next year, rebound 2.6 percent.

Much of the anticipated recovery was seen driven by businesses rebuilding their inventories after aggressively reducing unwanted stockpiles of unsold goods to match weak demand.

HOUSING PRICES TO HIT BOTTOM

Investment in the residential market would also add to growth, with the majority of the survey's respondents convinced that the housing market downturn, which has lasted more than three years, was close to coming to an end.

About two-thirds of respondents believed house prices will reach a bottom this year. The survey found that high house prices would not pose a threat to the sector's recovery.

The survey predicted that the unemployment rate will rise to 10 percent in the first quarter of 2010 and edge down to 9.5 percent by the end of that year. The labor market was not expected to regain most of the jobs destroyed in the recession until 2012 or beyond.

The weak labor market will continue to weigh on consumer spending, slowing the recovery. The jobless rate climbed to 9.8 percent in September -- a 26-year high -- from August's 9.7 percent.