Recession seen certain but not recovery's shape

By Joanne Morrison - Analysis

NEW YORK (Reuters) - On Wall Street there is little doubt the U.S. economy is in recession, and analysts now are beginning to wonder, and worry, about the type of recovery that lies ahead.

Often, a simple letter of the alphabet is used to describe a recovery's shape. While economists are uncertain what the future may hold, few expect a sharp V-shaped recovery in which economic growth would bounce back quickly from a slump.

"Certainly no one has projected a V-shaped recovery," said Bernard Baumohl, managing director of the Economic Outlook Group. "The nature of the problems that we are facing are very serious and as a result this is not some garden variety recession that we are having."

Instead, analysts say a crumbling housing market, and persistent credit and liquidity problems in money markets, suggest the letters W, L or U are more likely to describe the shape of the path economic growth will likely follow.

"We're in recession right now and it's going to last significantly longer and probably get a lot deeper," said Brian Fabbri, managing director of economic research at BNP Paribas.

Fabbri warns that banks still need to unwind a lot of mortgage-related bets, which will likely keep credit conditions tight. "They are doing it in a recession and it's exacerbating the recession," he said.

RECESSION FIGHT

The warnings come against a backdrop of aggressive efforts in Washington to keep the economy afloat.