Recession over, or Depression looming?

There is no shortage of opinion on the economic debate of the recession. Everyone feels the squeeze and certainty, in any form, is in short supply.

"The great recession in over" declares the National Association for Business Economics, after releasing a survey of 44 professional economic forecasters. However, Lucia Mutikani of Reuters quickly dispels any real joy of the news. "While the economy is believed to have rebounded in the third quarter, analysts believe that ordinary Americans will probably not see much difference as unemployment will remain high well into 2010, restraining consumption."

The bottom line according to the NABE is that the recession is over but the recovery is going to be much slower than after a normal recession.

The NABE also went on to say, "We don't necessarily expect the U.S. economy to fall into a double-dip recession. This time round, consumers will be reluctant to join the party."

Thomas Pally over at the Financial Times thinks, "The future is fundamentally uncertain, which always makes prediction a rash enterprise. That said there is a good chance the new consensus is wrong. Instead, there are solid grounds for believing the US economy will experience a second dip followed by extended stagnation that will qualify as the second Great Depression."

The solid ground...

"Unemployment insurance is not up to the scale of the problem and is expiring for many workers. That promises to further reduce spending and aggravate the foreclosure problem."

"States are bound by balanced budget requirements and they are cutting spending and jobs. Consequently, the public sector is joining the private sector in contraction."

"...both the household and business sector face extensive bankruptcies that amplify the downward multiplier shock and also limit future economic activity by destroying credit histories and access to credit."

"Lastly, the US continues to bleed through the triple hemorrhage of the trade deficit that drains spending via imports, off-shoring of jobs, and off-shoring of new investment."
(Cash for Clunkers)

So, What is the conclusion? I am always skeptical of economic forecasters who look to past data to draw conclusions about current data. I still think things are going to get worse before they get better. How much worse is anybody's guess. The smart play is to save and rebuild your credit if possible. Yes, if everyone saves their money the economy will struggle to grow. But I'm afraid the prospects of growing will have to include vast changes in current monetary policy. The safe bet is to expect a good result for the next five to ten years will be to maintain our current wealth with eye towards improving our financial infrastructure (credit, savings) to build on in the future.

UPDATE (Loghueriat): The comment option has disappeared for some reason and I'm too tired/lazy/me to figure it out at the moment. Anyhow, I predicted on BPB a year ago that it would take two years for the Dow to get back over 10k consistently. That still sounds about right, especially with what you're saying about a "slow recovery." I have to say that we're on the same page lacking faith in the powers of deduction in economic forecasting, but that doesn't mean there aren't principles at work. Economics is a science, not a scepter. The devalued dollar will be the story of the next decade.