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Economists predict ‘the most disappointing recovery’


The U.S. economic recovery may be the slowest since World War II to regain all the ground lost during the recession, even if economists’ more optimistic forecasts for expansion turn out to be right, Bloomberg said.

The slump this time was so deep, said JPMorgan Chase & Co. chief economist Bruce Kasman, that the 3.5 percent average quarterly growth rate he foresees in the next year won’t be enough to bring gross domestic product (GDP) back to its $13.42 trillion pre-crisis peak. That’s in contrast with the last 10 recoveries, when GDP returned to its previous levels within 12 months.

The result: A year after the Lehman Bros. Holdings Inc. bankruptcy helped drive GDP down to an annualized $12.89 trillion in the second quarter, there’s still “plenty of malaise,” Kasman said. Unemployment may remain close to the current 26-year high of 9.7 percent through 2010, upsetting voters ahead of midterm congressional elections and forcing officials to keep interest rates near zero and the budget deficit around this year’s record $1.6 trillion.

“This will be the most disappointing recovery,” said Kasman, whose forecast is more optimistic than the median estimate of 2.5 percent growth in a Bloomberg News survey of economists.

The United States might not recover the 6.9 million jobs and the $13.9 trillion in wealth lost during the recession until about the middle of the next decade, said Mark Zandi, chief economist at Moody’s Economy.com. The unemployment rate may never get back down to the 4.4 percent low of 2007, he said.

Stock prices may take three or four years to reach their previous highs as the cyclical revival of the economy gradually boosts corporate profits, said Allen Sinai, chief economist at Decision Economics Inc. in New York.

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