ST. LOUIS - Following the lead of Fed Chairman Ben Bernanke and the stock market, the nation’s top business economists, gathering here for their annual meeting, have declared “the Great Recession of 2008-09 is over.” But the forecasters aren’t exactly popping champagne corks about what they see coming next.

After the deepest slide since the Great Depression, the economy looks like it has finally hit bottom, according to a survey of the National Association of Business Economists. The group sees the gross domestic product posting a solid 2.9 percent gain in the second half of this year.

That’s the good news. The group is less confident about the strength of the recovery, saying it is “likely to be more moderate than those typically experienced following steep declines.”

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And they see a long list of problems that could weaken that recovery.

The biggest worry: a prolonged period of high unemployment following the destruction of eight million jobs since the recession began in December 2007. The economists don’t see the jobless rate falling below 9.5 percent by the end of next year. They expect only weak job growth in 2010; an average of some 107,000 net new jobs created each month in 2010. That’s barely enough to keep up with the annual growth of the workforce.

"You can have 2 or 3 percent GDP growth and not have job growth, and that in turn doesn’t help sustain economic growth,” said Stuart Hoffman, chief economist at PNC Financial Services. “Economies are like gears — they all have to engage. And you can get one wheel spinning, but if it doesn’t engage, it eventually loses momentum.”

With one in 10 workers without a paycheck, the level of consumer spending is also expected to be weak — inching up next year by just 1.6 percent. High levels of debt and trillions of dollars of lost home equity will continue to put a big crimp on spending.

Consumers may catch a break if the NABE is right about its inflation forecast, which calls for prices to rise by just 1.4 percent next year. The low inflation forecast is largely based on the conventional wisdom that the amount of slack demand and excess capacity in the economy — the so-called “output gap” — will keep pressure off price hikes for raw materials and force companies to keep their prices down.

But James Bullard, president of the Federal Reserve Bank of St. Louis, warned that given the Fed’s massive expansion of the monetary base to combat the financial meltdown, the economists may be too quick to dismiss the risk of higher inflation.

“I am concerned about a popular narrative in use today — the narrative being that the output gap must be large since the recession is so severe,” Bullard told the economists at a luncheon speech. “And so, any medium-term inflation threat is negligible, even in the face of extraordinarily accommodative monetary policy. I think this narrative overplays the output gap story.”

With weak consumer spending expected to add little to growth, the hope is that businesses will begin to invest in rebuilding inventories that have been slashed during the recession and to buy equipment they’ve deferred replacing during the downturn. But those businesses may have trouble getting credit; just as employers are skittish about hiring, bankers say they’re having trouble finding enough solid businesses to lend to, according to Bullard.

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“They want to make loans because that’s how they make money,” he told reporters. “But they don’t want to make a bad loan because that’s how that’s how they got into trouble.”

With bankers pulling back, credit has also tightened in the so-called “shadow banking” market, in which loans are packaged into securities and sold to investors. Once a ready source of capital for mortgages, student loans and credit card debts, that market has largely shut down.

“If you can’t get this market back, you’re not going to be able to finance most consumer loans,” said Gary Gorton, an economist at the Yale School of Management.

CONTINUED : Long list of pitfalls

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