Recovery may be two years away, economist says

Mark Vitner, the senior economist with Wachovia Corp., predicted the current recession will end later this year or early 2010.

By: GREGORY J. GILLIGAN TIMES-DISPATCH DEPUTY BUSINESS EDITOR | Richmond Times Dispatch
Published: February 26, 2009

The U.S. recession could be hitting bottom, but it will be two years or more before the economy fully recovers.

Mark Vitner, the senior economist with Wachovia Corp., predicted the current recession will end later this year or early 2010.

The economy probably is in the midst of the "absolutely worst part" of the recession, though he believes more job cuts will be made through May or June.

"I don't think the recession will intensify much more, but it will still drag on," Vitner said after addressing the 100-plus people attending a breakfast meeting of Richmond-area commercial and residential real estate professionals yesterday.

But Vitner said it may take another year or more beyond the end of the recession before most Americans feel as if the economy has turned around.

"It will be a long road to recovery," Vitner said at the event, sponsored by Virginia Commonwealth University's real estate program and its Real Estate Circle of Excellence group.

"The first year of a recovery will be just as challenging as a recession," he said. "Most people won't know the difference between a recession and a recovery."

The unemployment rate typically continues to increase for months after economists officially declare the recession over as businesses are cautious about expanding and hiring. In prior recessions in Virginia, for instance, the jobless rate peaked in the year after the recession ended.

Even after the recovery takes hold, Vitner said times will be difficult as the federal government tackles mounting budget deficits to pay for the stimulus plan, a bank bailout and an overhaul to housing programs. The upshot could mean higher taxes to pay for those programs, or creating a consumption tax.

It will take the housing industry longer to fully recover, he said, pointing out that too many homes were built in the wrong places.

Vitner said the current recession is the worst one since World War II. "This is not as bad as the Great Depression."

Just as the 1973-75 recession ended the era of cheap and abundant energy, this current recession will end a period of inexpensive and excessive access to credit.

"This recession will change the economic landscape," he said.

Contact Gregory J. Gilligan at (804) 649-6379 or ggilligan@timesdispatch.com.