U. of Michigan: Recession to Get Worse

University of Michigan economists said Thursday that the U.S. is in fact in the midst of a recession and that the worst won't come until the middle of next year.

The economists said in a press release that they expect only modest economic growth in 2010, with unemployment above 8% throughout that year.

"The decline in employment that began at the turn of the year raised the specter of recession," said Michigan economist Joan Crary in a prepared statement. "Until the credit markets seized up, however, it appeared that the economy might squeak by with a 'growth' recession, enduring a period of job loss and very sluggish growth, but avoiding a full-blown recession. The financial crisis tipped the balance, curtailing economic activity and plunging the economy into a downturn.

"While the current financial crisis is an extreme event that has raised fears of economic collapse, we are not forecasting economic catastrophe but rather a recession that is best characterized as moderately severe," she continued. "And that moderate severity stems from the early enactment of a significant package of fiscal stimulus measures, including infrastructure spending and tax cuts."

Crary and her colleagues Stanley Sedo and Janet Wolfe believe that even with a "significant" fiscal stimulus package in place by early next year, real gross domestic product will be down 1% next year followed by a 2% advance in 2010.

Additionally, the U.S. will likely lose roughly 2.4 million jobs in the next 18 months before employment gains return in late 2010.