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 Monday.
The survey of 44 professional forecasters released by the National Association of Business Economists (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," said NABE President-Elect Lynn Reaser.
"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 current recession that started in December 2007 is the longest and deepest since the 1930s. It was triggered by the collapse of the U.S. housing market and the ensuing global credit crisis.
Financial Crisis: Then and Now
The NABE survey, conducted in September, predicted real GDP growth expanding at a 2.9 percent pace over the second half of this year. Output for the whole of 2009 is expected to contract 2.5 percent and next year, rebound to 2.6 percent.
Much of the anticipated recovery was seen driven by businesses rebuilding their inventories after aggressively reducing unwanted stocks of unsold goods to match weak demand.
Investment in the residential market would also add to growth, with the majority of the respondents in the survey convinced that the more than three-year housing market downturn was close to coming to an end.
House Prices Seen Bottoming
About two-thirds of respondents believed house prices would reach a bottom this year and the survey found that high house prices would not pose a threat to the sector's recovery.
The survey predicted that the unemployment rate would 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 the jobs destroyed in the current recession until 2012 or beyond.
The weak labor market would continue to weigh on consumer spending, slowing the recovery. The jobless rate climbed to 9.8 percent in September—a 26-year high—from 9.7 percent in August.
Labor market slack, combined with weak wage growth, meant inflation would not be an obstacle to the economic recovery and the Federal Reserve would not be under pressure to raise interest rates, the survey found.
"With improving credit markets, the U.S. economy can return to solid growth next year without worry about rising inflation," Reaser said.
The U.S. central bank was seen leaving its overnight benchmark lending rate near zero until late next spring, followed by measured increases that would take the rate to 1 percent by the end of 2010, the survey showed.
Despite signs of improvement in the financial markets, the majority of respondents believed that it would take sometime for them to return to normal. Only 29 percent reckoned this would happen in the second half of next year.
Respondents also expected the U.S. dollar to weaken further this year and into 2010, but did not see this contributing to a narrowing of the country trade deficit as the economic revival stimulates demand for imports.
The dollar has lost about 5.8 percent of its value against a basket of currencies so far this year, largely because of worries over the government's growing budget deficit and expectations that the Fed will keep interest rates at super-low levels for a while.
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