Light at the end of the economic tunnel, but not until 2010

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Everyone is looking for the light at the end of this dark economic tunnel. And UCLA's Anderson School of Management has put a date on the end of these dark days: they see economic recovery starting in 2010.

The school's forecast expects GDP to decline by 6.8 percent in the first quarter of 2009, 4.5 percent in the second quarter, and another 1.7 percent in the third quarter. But then the upswing will come in the first quarter of 2010.

The report predicts average quarterly growth in 2010 of 2.7 percent and then 4.1 percent quarterly in 2011. It does not foresee inflation in this time period, but does see the risk after 2011.

David Shulman, a senior economist with the project, expects the recession will last longer than the 16-month recession of 1981-1982. He predicts the current recession will last 19 to 24 months.

Jobs predictions are not as rosy, however. The study predicts 7.5 million jobs will be lost through the recession and the unemployment rate will reach 10.5 percent by the middle of 2010. The study also predicts unemployment will still be above nine percent by the end of 2011.

Shulman wrote in the report, "We still forecast a tepid recovery in 2010 as the contractionary forces become spent (i.e., housing can't get much lower) and the near-term positive impacts of monetary and fiscal policy take hold." Shulman also cautioned that the spending policies of the government could devalue the dollar in the long run, but he expects if that does happen it will be after his 2011 forecast horizon.

Lita Epstein has written more than 25 books, including Reading Financial Reports for Dummies.

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