When will this wretched economy bottom out? The US recession is already in its 15th month,making it longer than all but two downturns since World War II. For now,everything seems to be getting worse: The Dow is in free fall,jobs are vanishing every day,and one in eight American homeowners is in foreclosure or behind on payments.
But the economy always recovers. It runs in cycles,and economists are watching an array of statistics,some of them buried deep beneath the headlines,to spot the turning point. Heres an analysis of three markets housing,jobs and stocks as to where things stand and how to know when theyve hit bottom.
The US unemployment rate hit 8.1 percent in February,a 25-year peak. The nation has lost 4.4 million jobs since the recession began in late 2007. The job cuts began early last year,as the housing and construction industries slowed down. The collapse of the financial industry in the fall battered white-collar workers. Soon,layoffs spread across industries and income levels.
The darkest days for the job market are almost certainly still ahead. With spending weak and credit markets stalled,experts think the economy will probably shed a total of 2.4 million jobs this year. That would mean an unemployment rate above 9 per cent.
The median price of a home sold in the US fell to $170,300 in January,down 26 per cent from a year and a half earlier,according to the National Association of Realtors.
The Federal Reserve estimates home prices could fall 18 to 29 per cent more by the end of 2010. Declines will probably be less severe in cities with healthier economies that dont have a glut of unsold homes.
The Dow Jones industrial average and the Standard & Poors 500 index have lost more than half their value since the stock market peaked in October 2007. Its the worst bear market since the aftermath of the crash of 1929,when the Dow plunged 89 percent and the S&P 500 index tumbled 86 per cent. Analysts generally think Wall Street has endured the worst of the bear market. But many of those same analysts never thought the market would fall this far.
Many market experts say the bottom of the stock market could come in the second or third quarter of this year. And the recovery,whenever it comes,could be as breathtaking as the fall.