(Forgive me for ending the week on this note, but as they say, “It is what it is.”)

Regular readers know that I monitor a number of industry and economic indices and indicators each month, as well as subscribe to reports from several economists and industry analysts.  A fairly clear consensus has emerged over the last 4-6 weeks as to how the economy will perform from both a domestic and global standpoint during the next 12-18 months…

In this post I’ll try to capture my sense of what’s in store for us, and will keep the analysis at the 40,000 foot level.


Unemployment: As recently as the spring of 2007 the U.S. unemployment level was at 4.5%; today it’s at 6.5%.  A growing chorus of forecasters indicates it could go as high as 9% during the next 24 months.  I’ll stick with the forecast from MAPI:  2009: 7.7%; 2010: 8.3%; 2011: 7.8%.  The Manufacturer’s Alliance is suggesting it will be no lower than 6.5% in 2013!

GDP: GDP growth in 2008 will likely be somewhere in the neighborhood of 1½%. (Q4 is likely to be horrid, by the way.)  Kiplinger has consistently retreated from rosier forecasts over the last 6 months, and is now forecasting GDP growth of 0% for 2009.  I don’t believe that’s realistic given the financial sector collapse,  consumer confidence being at historically low levels and the fact that the housing market continues to seek bottom.  Other forecasters have 2009 at ~-1%, and I think it will be at least that negative. GDP should rebound somewhat in 2010, perhaps growing at 1 to 1½%

Housing Starts: The collapse of the housing market has so much to do with our current economic malaise. A few years ago starts numbered over 2 million on an annualized basis.  As of September of this year, starts were at an annualized rate of 817K; next year starts should bottom out in the high 600K range – somewhere in the first half of the year – and will rebound to the 900K to 1M range in 2010.

Existing Home Sales: ~5.4M in 2008; ~5M in 2009.  Won’t return to “normal” levels of ~6M until 2011.

Imported Crude price/bbl: Forecasts are all over the place on crude. I’ve seen 2009 forecasts as low as $55 per barrel and as high as $85.  I believe crude will average somewhere in the range of $65 to $70 per barrel for 2009, and will increase to $75 to $80 per barrel in 2010. A positive! Gas should be reasonably inexpensive for the next couple of years (the EIA is projecting the average price per gal of gas @ $2.37 for 2009; Kiplinger, $2.25)

Inflation: From Kiplinger:

“In addition to energy, prices of major items are declining, including apparel, new and used cars, airline tickets and hotels. But there are increases: in rents, education costs and prices of medical services.”

The CPI will likely grow by about 1% – 1.5% next year.

In short:  we are in for a protracted recession.

What Can I Do??

I’ve written about what the average person can do to survive a recession – click here for a recent post – and will simply touch upon a few basic strategies here:

  • Cut ALL unnecessary spending. If you don’t need it, don’t buy it. If you think you need it, give it a 24 hour – or longer – sanity check
  • Fund your emergency fund as though your life depends upon it
  • Hone your job skills and add value to your organization
  • Network like crazy
  • Develop alternate sources of income – a second job, a blog, sell stuff on eBay, etc.
  • Don’t panic. This too will pass…  it’s going to take some time, however

Hang in there. And if you have strategies you’ve put in motion during the economic slowdown, please share them by commenting! Thanks for taking the time to stop by and read this; I appreciate it!

Image:  Face It @ Flickr

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2 Comments on Fearless predictions for the 2009-2010 economy

  1. Work says:

    What Can I Do??

    In this topic, I think we need to mention:
    .Think out of the box.
    .Financial global strategy.


  2. David says:

    hi Kevin,
    your prediction is correct. situation still getting worse. could you please update your prediction now.


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