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ZANDI PREDICTS 4TH QUARTER RECOVERY

Speaking in New England late last week Moody’s senior economist, Mark Zandi, predicted a fourth quarter recovery in the economy.  Zandi says:

“The economy won’t come roaring back. The sectors that generally lead us out of a recession — housing and vehicles — are flat on their back and won’t revive rapidly. The economy will kick into high gear in 2011 and 2012.

On Jobs:

Prior to the 2001 recession, businesses were panicked about finding skilled workers. In the current recession I think many businesses were worried about their own survival and went through very draconian cost-cutting. Once they feel the coast is clear, I think they’ll be back again hiring.”

On housing he said:

“I am expecting the end of the [housing] price decline to occur later this year or early in 2010. But that is an assumption. We need to see the loan modification program work. If it doesn’t work, foreclosures will go up and that will put pressure on consumers because of loss of wealth.”

Zandi is generally a pretty level headed economist.  Well worth listening.  But I think even Zandi might be surprised by how slow the recovery is (assuming one occurs in the next year).  We haven’t seen a consumer driven recession of this magnitude in decades.  It’s unlikely that the economy can make a real base until the consumer balance sheet is clean again.   Read more on the painful process of deleveraging here.

2 comments
  1. Avatar
    Peter Collins

    I agreee with Zandi on the housing issue….the lenders need to get on board with the Obama Loan Modificaiton program to help speed the recovery.

  2. Avatar
    vfsv

    “We need to see the loan modification program work. If it doesn’t work, foreclosures will go up and that will put pressure on consumers because of loss of wealth.”

    —Zandi assumes home prices are only going down due to foreclosures. Never mind the disconnect with incomes over the last 4 -5 years— on top of the huge numbers of jobs/ incomes lost over the last 6 -9 months.

    Foreclosures will continue to go up regardless of loan mods.

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