Preliminary Economic Forecast: Bouncing Along the Bottom

Wednesday, the Economic and Revenue Forecast Council posted the "Preliminary June Economic Forecast." As we've come to expect, some good news and some not-so-good news. Here's both in a concise couple of sentences from the memo.

We believe the recession will officially end sometime in the third quarter with a peak-to-trough decline in real GDP of 3.7%, only slightly weaker than the 3.5% drop expected in March. The forecast assumes a “U” shaped recovery. Growth turns slightly positive in the second half of 2009 but remains weak for a year, picking up steam in the second half of 2010 and 2011. 

Brad Shannon has a bit more at his Olympian blog, concluding with the main point for budget watchers.

Raha offers his formal economic review on June 5 in the Cherberg Building on the Capitol Campus. His more closely watched two-year revenue forecast is scheduled for release at 10 a.m. June 18.

I don't look for big changes in the June forecast, other than what's necessary to reflect underperforming tax collections since the March forecast. 

Schmudget notes that the unemployment rate will continue to rise through the third quarter of 2010. 

The "U" shaped recovery may be an optimistic scenario. Some economists still foresee a "W," with a short respite followed by another dip before the economy gets back on track. Regardless, the employment picture will continue to keep the public off balance. This morning's Rasmussen Reports shows that, despite some official optimism in D.C., public opinion has changed little in the last month.

President Obama nd Treasury Secretary Timothy Geithner both said this week that they see optimistic signs in the U.S. economy, but the short-term and long-term perspectives of most Americans remain unchanged over the past month.

Confidence that the economy will be stronger one year from now is up slightly from the first of the year, but looking five years down the road, economic confidence is down six points from March.

That lack of confidence continues to depress consumer spending. As well, strapped consumers are unlikely to respond positively to appeals for higher taxes to sustain public spending.  I posted this on the California election May 19. In today's Puget Sound Business Journal I explore the message from California in a little more detail.