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Economists Increasingly Convinced US is in Recession

With the global credit squeeze and stock market decline apparently gathering speed, corporate economists in the United States are increasingly of the view that the American economy is in recession. VOA's Barry Wood reports.

Forecasters attending the Washington meeting of the National Association of Business Economics, or NABE, say the United States is already in the grip of recession.

A recession is an economic downturn of at least six months. Technically, a panel of non-government economists determines whether a recession has begun. So far, that panel - the National Bureau of Economic Research - has not made a declaration.

But economists at the NABE meeting say that with housing prices in sustained decline, credit markets frozen and consumer spending slowing, the question is not whether the U.S. economy is in recession, but how long it will last.

Forecaster Chris Varvares, the incoming president of the NABE, fears that the downturn could be deep and long.

"There is a probability growing that has a much worse outcome for gross domestic product and that is a kind of 'into the abyss' scenario," said Varvares. "We hope we don't go there. We hope that the Treasury and the Fed [the Federal Reserve, the U.S. central bank] and all the other central banks around the world will keep us out of it. But confidence is very fragile."

The 40 corporate economists surveyed two weeks ago say there will be no economic growth during this last quarter of the year - with very little growth for the entire year.

A mild upturn is expected in 2009. Their best-case scenario is a 2.7 percent growth rate in the second quarter.

Princeton University professor Paul Krugman told the conference that the United States is in the same kind of deflationary economy that gripped Japan throughout the 1990s.

He said fears that even if official short-term interest rates were reduced from their current two percent level, financial institutions would still be unwilling to lend. Krugman warns that the U.S. economy faces its deepest recession since the Second World War. He wants the government to institute a second fiscal stimulus program to put money into the hands of consumers who would spend it.