2009 Recession Predictions – Will the Recession End?

Oct 6, 2009

Oct 6, 2009 | Posted by in Featured, Investment & Finance | 0 Comments

When will the recession end?

2009 poll for unemployment in the united states demonstrates that unemployment is at a 25-year high, and the second wave of bad mortgages is about to hit. Despite this, many analysts claim that the economy is in recovery. Consumer spending in particular has not rebounded as projected. 2009 upper class consumers spending has been flat for the last several months.

2009 household income in America have lost too much wealth in the financial collapse to continue spending as they did in the period of 2002 – 2008. People are scrambling to make ends meet now, and then they’ll be scrambling to rebuild their emptied nest eggs. Then there are those people who didn’t have any nest eggs – they may decide that having one is worth their while. The sagging economy may be a wake-up call to those people who were consistently spending more than they brought in. If this is the case, we can expect consumer spending to remain flat, or decline, for a long while. It will be interesting to see what consumer spending in last quarter of 2009 will be – There are only 90 shopping days till Christmas!

Business investments fell 38% in the first quarter of 2009, but this part of the economy is starting to stabilize, and may even grow by the middle of next year. The problem lies in that a lot of the turnaround for businesses has been through cutting labor costs – either reducing wages or laying people off. Unemployed people with no money don’t spend money, contributing to the slowdown in the consumer sector.

It is interesting to note that consumer spending is one of the largest portions that make up the economy in general; the other parts are government spending, business spending, and exports. Consumer spending makes up 70% of the US economy, and without it, a full recovery is difficult indeed. Part of the stimulus package has been to try and boost government spending, as well as put more money into the hands of the people.

The truth is, the stimulus package is good , but it doesn’t go far enough. Who gets a check from the 2009 stimulus package?The initial tax credit of $400 works out to $8/paycheck. Most people right now would benefit more from putting that money into a bank account or an extra credit card payment, rather than going down to WalMart and buying consumer goods. Like the stimulus package passed by the Bush administration, which was enough to afford each family a nice dinner out, this doesn’t do much to put money in our pockets.

Other breaks are only available if you purchase a new home or car. With unemployment figures for september 2009 in the united states down 10%, most people are very cautious about purchasing a large item like that, low interest rates notwithstanding.

Taking all these items into account, the economy’s recovery is going to be, at best, anemic. Credit markets are still tight for businesses and consumers alike. Despite both following tight budgets, and slashing costs, there is a lack of capital available. Despite the provisions in the stimulus bill, our country is facing a recession that may begin to turn around by the end of 2009, but the downturn is more likely to persist until mid 2010.


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