Recession? No, but Expect Slow 2008: Economist

There will be an economic slowdown in 2008 but “healthy export growth and continued business spending” will steer the economy away from a recession, according to Dr. Scott Anderson, senior economist for Wells Fargo & Co.

Consumers are tapped out and the recent moves by the Federal Reserve to lower interest rates may not be felt until after spring time, Anderson said during the bank’s annual economic forecast teleconference last week. Anderson predicts payrolls will grow next year at a lethargic 0.8 percent rate, sending consumer spending up 1.8 percent, down from 2.7 percent in 2007.

Meanwhile, the unemployment rate could hit 5.1 percent by the third quarter next year. “Many Americans appear to be one job loss away from mortgage default and bankruptcy,” said Anderson. A rise in unemployment could spur banks to restrict credit, and that would send home prices down more than the 10 percent drop that some have predicted.

The teleconference was not completely gloomy. Dr. Jim Paulson, the chief investment strategist at Wells Capital Management, noted the stock market is within 5 percent of all-time highs, and 8 out of 10 economic sectors in the S&P 500 are up 6 percent or better.

“More than 95 percent of people in the U.S. who want to have a job have one and they’re still spending,” said Paulsen. The weak dollar is helping exports to surge, he noted.