Wells Fargo economists see recession's end in late 2009

Wells Fargo economists see recession's end in late 2009

Charlotte Business Journal

The deepest and longest recession since the 1930s will end in the second half of 2009, Wells Fargo & Co. economists say in their annual forecast.

The third quarter of next year will be “better than expected” by many, says Jim Paulsen, chief investment strategist. “It’s like you’re at a cookout and you’re trying and trying to get your charcoal going and you keep squirting on lighter fluid, and all of a sudden it goes ‘poof!’ ”

Paulsen says “fear mongering” by government officials who were trying to sell the $700 billion Troubled Asset Relief Program in the fall made the situation much worse, freezing everyone in their tracks and bringing on “economic paralysis.”

Senior economist Scott Anderson predicts that housing will lead the way back. “One bright note is that the sector that led the economy into this morass is about to turn the corner, perhaps as soon as this summer, and will start to lead us out.”

The job market is now one of the worst in decades, with 3.7 million more jobs expected to be lost next year, Anderson says. That means 5.5 million jobs will be lost in this recession, twice as many as were lost in the 1981-82 recession, the second-worst since World War II.

Eugenio Aleman, senior economist at San Francisco-based Wells Fargo (NYSE:WFC), says he is concerned that injecting of hundreds of billions of dollars into the economy through the financial sector is not helping those who need it most.

“Current monetary policy will help only those households that do not need help — those that have plenty of money and have a stable job,” he says. “They will refinance, buy homes and consume. It will not help those who are struggling to make ends meet, or have lost their jobs or may soon lose them, because no financial institution is going to lend them money to buy a home, no matter what the interest rate is.”

He says the new administration will need to help those households through fiscal policy, with government spending that will create jobs.

Article provided courtesy of Charlotte Business Journal

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