Economists: U.S. to See Worst Recession Since 1980s

Fears that the United States could see its worst recession in recent memory have spread, with the real economy beginning to show signs of strain in consumption and manufacturing.

Though the downturn might prove not as serious as the situation right after the oil shock of the early 1980s, many experts say it will be far worse than the blip of the recessions in the early 1990s and early 2000.

Economic indicators also say the U.S. economy has sunk into recession. The National Activity Index from the Chicago Federal Reserve Bank for September moved deeper into recession territory at minus 2.57, the lowest since the 1982 recession.

The index is a weighted average of 85 macroeconomic variables, and is one of the most reliable indicators of national economic activity. Typically, a score below minus 0.70 points indicates negative U.S. economic growth.

Retail sales fell 1.2 percent in September, entering negative territory for the first time since October 2002.

Industrial production also fell by 2.8 percent, nearly triple the expected drop of 0.9 percent.

Unemployment rate was 4.4 percent at the end of last year, but has risen to 6.1 percent and is expected to break seven percent soon.

So the focus has shifted to how long and nasty this recession will be.

U.S. business news channel CNBC said Wednesday few experts believe this downturn will match that of the 1973-75 and 1980-82 recessions, when unemployment surpassed 10 percent and gross domestic product fell 7.8 percent in one quarter alone.

Most economists, however, say this recession will prove far worse than the relatively short downturns of 1990-91 and 2000-01.

Nouriel Roubini, an economics professor at New York University, is pushing his doom-and-gloom forecast. He predicted this recession will be the worst since the 1980s.

In an interview with CNBC, he said he expects two years of negative economic growth, adding the last two recessions lasted only eight months each, but this one will be three times as long and three times as deep.

Other experts predict negative U.S. growth between the third quarter this year and the first or second quarters next year, though their forecasts are not as bleak as Roubini’s.

The last time the U.S. economy shrank for three consecutive quarters was in 1974-75, which also happened to when growth was negative for two years.

Most economists say this recession will be worse than the decline of 0.5 percent in the 2000-01 recession, but probably not as bad as the three-percent decline in the early 1990s.

higgledy@donga.com