From the Ashes, a Spark of Hope

In a report to the Congress on Feb. 24-25, Chairman Ben Bernanke pledged that the U.S. Federal Reserve would do everything in its power to help stabilize the economy and the financial markets. Bernanke also offered something that has been in short supply from the mainstream media's gloom and doom--hope.

"There is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery.” But he stressed that, for this pattern to materialize, actions taken by the Administration, Congress and the Federal Reserve must be successful in, “Restoring some measure of financial stability.”

Bernanke said a full recovery of the economy from the current recession is likely to take more than two or three years. Very large gaps between actual and potential GDP are opening up, and a large degree of slack is developing in the labor markets. Unemployment, which is currently at 7.5 percent, is expected to grow to nine or 10 percent in 2009.

Economists with the National Association of Home Builders Share Bernanke’s optimism on the economy. NAHB’s forecast places the end of the current economic recession around the end of 2009. "We’re viewing 2010 as a recovery year that will lead to a multi-year economic expansion that will achieve sustainable rates of GDP growth, unemployment and inflation," according to NAHB's Eye on the Economy.

Recent housing data have compelled a substantial cut to our housing forecasts for 2009-2010. However, the troughs for home sales, housing starts and residential fixed investment still occur within 2009, and housing figures to be an integral part of the economic recovery in 2010 as long as “some measure of financial stability” is restored.