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A Quick Economic Recovery

A Quick Economic Recovery

Economists and other experts are predicting some wild ideas. Some economists from around the country have predicted a quick and strong economic recovery. What exactly is their reasoning? They figure that because the economy took such a dramatic downturn, it is bound to experience a fast and strong recovery.

It isn’t surprising to hear that the U.S. economy is in bad shape…really bad shape. 2.6 million Americans lost their job last year along. The majority of these people lost their job in the last four months of 2008. There has been a projected 5%-9% decrease in overall economic activity during the fourth quarter of 2008. If this is true, it would mark the biggest drop in economic activity in over 50 years.

Businesses have had to quickly decrease production and inventories. However, businesses are now working harder than ever to “ramp up production.” Businesses started slowing down production once the Lehman Brothers went bankrupt in September.

For instance, Joseph Carson, chief economist at AllianceBernstein, gives us an idea of how his company is faring. He said, “We were producing 2 million tons of steel a week prior to Lehman. Now we’re producing 880,000 a week. The economy has slowed, but it has not fallen by half in the last three months. This kind of significant inventory liquidation is exactly why recoveries take place.”

Many other people put their trust in the Federal Reserve and Congress. These people contribute and predict a fast recovery because of the many steps these organizations have taken to “fix” the economy. The government’s economic stimulus pack, along with low energy prices, could cause a dramatic increase in economic activity.

This kind of recovery is called V-shaped. Why? Because if someone were to map the state of the economy on a chart, it would look like the letter V. It would be characterized by a steep decline in economic activity, followed by a quick and strong recovery.

Lakshman Achuthan, the managing director of the Economic Cycle Research Institute, is one that is predicting a successful recovery. He said, “Generally the sharper the recession, the sharper the recovery.”

Hopefully, these economists are right instead of dreadfully wrong.