US economy unlikely to recover quickly

The chances of the U.S. economy falling into a recession are 95 percent, an economist said at a real estate conference Thursday.

Photo: US economy unlikely to recover quickly

Kenneth Rosen, a professor of real estate and urban economics at the University of California-Berkeley, put the chances of a deep recession at 45 percent and a mild one at 50 percent. He only sees a 5 percent chance that the economy will quickly recover.

"We're on very fragile ground. All we need is one more bad thing to happen, another event to take place," to send the economy into a deep recession, Rosen said during a panel at the National Association of Real Estate Investment Trust's REIT Week investor forum in New York.

In his deep recession scenario, the economy would contract by 1.8 percent and the unemployment rate would rise to 7 percent, he said. The Standard & Poor's 500 index would hover around 1,050, and the Nasdaq composite index at 1,700.

By contrast, the economy would shrink by 0.1 percent in a mild recession with unemployment edging up to 5.8 percent. The S&P 500 would level off at 1,400 and the Nasdaq at 2,300.

The unemployment rate now stands at 5 percent and the economy grew at a weak 0.9 percent during the January-to-March period. The S&P 500 closed Thursday at 1,404.05, and the Nasdaq ended at 2,549.94, the AP reports.

Soaring exports and stronger-than-expected domestic demand for US-made goods contributed to the brighter reading, which is the second of three GDP estimates made by the US Commerce Department as more and better data arrives.

Economists had been expecting the upward revision, and warned that 0.9 per cent growth still reflects a sluggish economy. Second-quarter GDP is forecast to be lower, as high fuel and food prices crimp consumer spending and business profits, but the consensus is still that the US economy has remained in positive territory.

A recession is commonly defined as two consecutive quarters of negative GDP growth.A further bright spot in yesterday's figure was an upward revision to personal income, which suggests that consumer spending may not be as vulnerable as feared. However, in a separate survey, new jobless claims rose 4,000 last week to 372,000, and the number of people claiming benefit in the US now stands at 3.1 million, the highest level since February 2004, The Independent reports.

Source: agencies