Economists say recession is here, and will last Two surveys project that U.S. downturn may be longer than average

The global economy has plunged into a deep recession that may be longer than the average downturn, according to two surveys of U.S. economists that echo similar declarations from authorities in Europe and Japan.

Observers say this global slowdown will start to wallop the Bay Area as the United States enters a spell of shrinking output and surging unemployment that will last through the middle of 2009.

The gloomy picture began to emerge Monday as the Federal Reserve Bank of Philadelphia reported that its quarterly survey of 51 economic forecasters had turned up the unanimous conclusion that the United States is in a recession.

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"It's very, very rare to get unanimity on any question," said Tom Stark, the economist behind the Philadelphia Fed report.

The consensus among economists surveyed by the Fed is that the country entered the recession in April, that it will last 14 months and would drive the U.S. unemployment rate, now 6.6 percent, to 7.6 percent by the third quarter of 2009.

That finding was echoed by a separate and also nearly unanimous survey issued Monday by the National Association for Business Economics.

Though the two surveys have great weight, U.S. recessions are only officially designated in retrospect by a seven-person committee affiliated with the National Bureau of Economic Research. This scholarly group has characterized 10 recessions, averaging 10 months each, since World War II, the most recent being the dip from March to November in 2001.

The bureau has not yet called a recession because it uses a more complex definition than authorities in Europe and Japan, said Nariman Behravesh, senior economist with IHS Global Insight in Boston. They pronounced their economies in retreat after two quarters of declining gross national product.

On Friday, the European Union said the 15 nations that use the euro as their currency were in recession as Germany and Italy joined Ireland in posting back-to-back output declines. The last big downturn in Europe was in 1993.

Japanese authorities also declared their nation in recession Monday as the housing-inspired woes of the United States and Europe weaken demand for cars and electronics from Japan.

The only bright spot in the two nearly unanimous surveys is that the downturn has calmed inflation, most notably gas prices, giving consumers extra purchasing power, Behravesh said.

"The recent $2-per-gallon drop in gas prices is the equivalent of a $240 billion tax cut," said Behravesh, who called for the United States to enact a "big and quick" fiscal stimulus package.

Any such package would further strain the federal budget, already burdened by the $700 billion financial bailout, and contribute to a record trillion-dollar federal budget deficit in fiscal 2009.

From a Bay Area view, the global slowdown threatens tech exports and tourism, which have so far cushioned San Francisco and the Silicon Valley from the housing bust that has already clobbered the East Bay, said regional expert Stephen Levy of the Center for the Continuing Study of the California Economy in Palo Alto.

"The world economy has turned down, and they are big customers of ours," said Levy, who fears bigger job losses ahead.

Senior Wells Fargo economist Scott Anderson, who was among those surveyed by the Philadelphia Fed, said conditions have been deteriorating so rapidly that his own forecast has worsened. He now thinks unemployment could hit 8.5 percent by the end of 2009.

Forecaster Joel Naroff, a Pennsylvania economist who also responded to the Fed survey, said policymakers in Washington must craft a large and quick stimulus package to inject money into the economy to prevent the recession from becoming longer and deeper. Thirty-five of the 51 economists surveyed by the Fed said their forecasts assumed that Congress would pass a $211 billion stimulus plan.

Behravesh said a combination of quick-acting tax rebates and longer-term infrastructure programs would provide the most bang for the buck.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, has calculated that new spending related to the financial crisis coupled with revenue losses due to the recession could lead to a $1 trillion federal deficit in the coming fiscal year, with revenue of $2.4 trillion to offset $3.4 trillion of spending.

"We must do whatever the economy needs," she said, while warning that such a high level of federal borrowing could have the perverse effect of driving up the interest rates that the Fed is attempting to keep low.

"We are walking a tightrope," MacGuineas said.