The U.S. economy is set to emerge from recession in the second half of this year as consumer spending and the housing sector recover, but unemployment will rise well into 2010, according to a survey.
The Blue Chip Economic Indicators survey of private economists released on Friday showed that 86 percent of respondents believed that the economic downturn would be declared to have ended in the second half.
"Real GDP contracted very sharply during the first quarter of this year and will continue to shrink, albeit more slowly in the second quarter before turning very modestly higher in the third and fourth quarters," the survey said.
Much of the anticipated turnaround in the economy, now in its 16th month of recession, would be driven by some improvement in consumer spending, housing, business inventories and exports. Yet, above-trend growth was not expected until the second half of 2010.
Gross domestic product plunged at a 6.3 percent annualized rate in the fourth quarter of 2008, the steepest quarterly decline since 1982. The economic downturn will next month become the longest U.S. recession since the Great Depression.
However, recent economic data have suggested that the pace of deterioration might be slowing.
According to the Blue Chip survey, consumer spending which accounts for over two-thirds of U.S. economy activity, will be supported tax cuts from the government's $787 billion stimulus package, the extension of unemployment benefits and lower inflation.
But even with the anticipated improvement in the economy's fortunes, companies were expected to continue laying off workers well into 2010, the survey showed.
"The huge output gap created by the recession implies that unemployment will continue to rise well into 2010," it said.
The jobless rate surged to 8.5 percent in March, a fresh 25-year high. Since the start of the recession in December 2007, about 5.1 million U.S. jobs have been lost.
Participants in the Blue Chip survey reckon the unemployment rate will not hit its cyclical peak until the second half of next year. The survey forecast the unemployment rate peaking at 9.8 percent.
The survey of 52 economists conducted between April 1-2 predicted that real gross domestic product would contract by 2.6 percent this year on a year-on-year basis, beating the 1.9 percent decline in 1982 that had marked the largest annual contraction in post-war period.