Some Analysts Predict a Sharp Rebound While Others Foresee Sluggish Growth; a Few Say Another Slump Is Possible

The U.S. economy is pulling out of its deepest and longest recession since the Great Depression. Some economists expect a powerful recovery, others a sustained but muted one. Some even say it will be neither: a fleeting rebound quickly followed by a second slump.For Americans beleaguered by almost two years of economic pain, the contours of the recovery will determine how many people linger without jobs, whether cutbacks to public services are restored and how quickly savings and investments gain value.Economists trying to predict the shape of the recovery look for parallels in previous recessions. But the current downturn, which started in December 2007, has echoes from a multitude of economic slowdowns.
By Sudeep Reddy, August 18, 2009 WSJ

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After Steep Drop, a Sharp Rebound: The most common path for the economy after a severe contraction has been a huge rebound in economic activity. Employers usually slashed their payrolls and output so sharply to protect themselves, and consumers postponed so many major purchases during the worst of the downturn, that a return to growth came with a fierce expansion.After the deep recessions of the 1970s and 1980s, business activity rebounded and within several months employers were rapidly rebuilding their payrolls. “You can’t find a single deep recession that has been followed by a moderate recovery,” said Dean Maki, chief U.S. economist at Barclays Capital. And most forecasters proved to be too pessimistic as prior deep recessions ended. “Very few people were looking for the kind of growth numbers that were actually printed,” he said.

Three Historic Recovery Scenarios:


All charts: 08/18/09, WSJ