NEW YORK (Reuters) - U.S. unemployment will top 9 percent before the recession is over, according to a Reuters poll of economists that points to a significantly bleaker economic outlook than just one month ago.
The current quarter is likely to mark the low point for output, marking a 4.9 percent annualized contraction, the worst since 1982 and far deeper than the 3.5 percent shrinkage forecast in a similar poll just one month ago.
U.S. gross domestic product (GDP) shrank an annualized 3.8 percent in the fourth quarter of 2008, the deepest trough since 1982 although not as bad as the euro area or Japan.
But analysts say an eventual rebound in U.S. growth will be at best meek since the crisis has done lasting damage to the nation’s productive potential.
U.S. GDP will shrink 1 percent in 2009 as a whole, according to the poll of nearly 60 economists taken Feb 13-19, contracting sharply in the first six months but then slowly gaining some traction toward year-end.
“Even that may be way too optimistic,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank.
Unemployment is forecast to rise sharply, eventually putting more than 13 million Americans out of work. Already at 7.2 percent, the highest since 1992, the jobless rate is set to soar to 9.1 percent, a level not seen since 1983, before it stabilizes.
The figures were collected before the Fed published the latest downgrade to its own forecasts, effectively giving up hope for economic growth in 2009.
Financial markets also have gotten a strong whiff of the deteriorating outlook in recent days. U.S. stock markets sold off sharply earlier this week, closing not far above the lows reached in November.
Inflation concerns should remain on the backburner this year, with analysts looking for an average 1.1 percent rise this year in core consumer prices, which exclude food and energy. That compares with 1.4 percent in last month’s survey.
The latest Reuters weekly consensus shows economists are expecting headline consumer prices to decline 0.2 percent on a year ago when the January figures are released on Friday, the first outright fall on a year-ago basis since the 1950s.
This will give the Federal Reserve room to keep interest rates at rock bottom for a long time. A poll of nearly 100 economists found the central bank is unlikely to tighten monetary policy until at least the second quarter of next year, and even then very slightly.
Top White House advisor Larry Summers said on Wednesday that because the recession would last at least a few more months it will eventually prove the longest period of retrenchment since the Great Depression.
Comparisons to the Depression have become more common as the crisis deepens. Indeed, the drop in home values has already exceeded that seen in the 1930s and their impact is much more widespread given huge increases in homeownership since then.
Nor does the housing downturn show any sign of abating. U.S. housing starts and building permits both fell to new records lows in January.
President Barack Obama pledged on Wednesday to do more to stem foreclosures, saying he would spend $75 billion for such purposes and provide an additional $200 billion backstop for mortgage lenders Fannie Mae and Freddie Mac.
But economists appear more pessimistic, despite the hundreds of billions of government spending pledged.
“The fiscal stimulus will not be enough to turn the economy around until perhaps Q4 2009, and not until the second half of 2010 will growth be on a sustained and robust recovery path,” said Scott Anderson, senior economist at Wells Fargo.
Data gathered by Bangalore Polling Unit; Reporting by Pedro Nicolaci da Costa