Amid gloom, signs of hope for economy in 2009

Getting those trillions of dollars into the hands of consumers and businesses takes time. But as the wave of cash begins to filter down over the next six months, the result could be “an abrupt reversal in conditions by the end of the new year,” according to Mike Englund at Action Economics.

“We have yet to benefit from the effects of TARP investments and Fed efforts to take private sector debt onto the public balance sheet,” he said. “And the new administration may be planning a massive stimulus package of as much as $1 trillion that could hit just as the economy is actually already bouncing.”

Though most of our panelists expect a return to growth in the second half of 2009, there’s less certainty about how strong that recovery will be.

“I think confidence returns by the summer and growth rebounds sharply by year's end,” said Joel Naroff of Naroff Economic Advisors. “I don't believe the economy can get out of this mess by growing slowly and steadily. We need a sharp increase in growth to keep both the financial and real estate sectors of the economy from cratering.”

That sharp increase in growth could be fueled by a pent-up demand, especially for housing. With so many buyers sitting on the sidelines for so long, a clear sign of a bottom in housing prices — along with substantially lowered mortgage rates — could spark brisk demand for housing and revive the moribund homebuilding industry.

Those low rates won't help the millions of homeowners facing foreclosure who are stuck in unaffordable mortgages with onerous "prepayment" penalties; without additional government relief, more than three million more homeowners are expected lose their homes in the next two years. The glut of empty houses could postpone a housing recovery until well into 2010.

But if that foreclosure wave can be stopped, a return to more normal levels of home buying would help spur demand for a variety of other products — from building materials to home furnishings and appliances.

“With massive monetary and fiscal stimulus and a big plunge in energy prices, the U.S. economy may be like a rusty gate: unable to turn in the short run, but then swinging wide open in the second half (of 2009),” said Ethan Harris, co-head of U.S. economics research at Barclays Capital. “Remember, in a normal recovery from a big recession, growth is above 5 percent for a year or so. That sounds like fantasy stuff from where we sit today, but it is possible.”

Economists on the msnbc.com panel were less optimistic about a recovery in the job market. All 12 expect the unemployment rate to end 2009 substantially higher than the current 6.7 percent rate; some see unemployment at 9 percent a year from now.

That pattern follows the performance of the job market in the last two recessions, including the so-called “jobless” recovery after the 1991 recession and the “job loss” recovery of 2001, when the unemployment rate didn’t peak until nearly two years after the economy pulled out of its millennial slump.

“This relates to the intense pressure that a lot of businesses are under to remain competitive and improve productivity,” said Behravesh. “So I think it could very well be that this time around as well we will see job growth lagging the recovery in a significant way."

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