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After the financial wreckage of last year, it is bold to forecast this year's performance of the U.S. economy. Even so there is consensus, among moderate optimists, that the economy will rebound during the second half of this year.
The political transition in Washington, with the Democratic Party in control of both the executive and the legislative branches of government, gives ground to this moderate optimism. Particularly because of the perception that these trying times demand active government intervention to stop the massive disruption in financial markets, as well as to stop foreclosures, which are deepening the slump in housing prices. Furthermore, the new economic team has been working on a new "economic recovery plan," which is estimated to amount to $1 trillion, for the next two years. Additionally, the central bank is expected to continue practicing "aggressive easing," mainly through liquidity injections, given that overnight federal funds rates are down to zero.
One of the few positive stories from 2008 is also feeding moderate optimism: the fall in oil and other commodity prices are contributing to low levels of inflation. However, the fact that the recession is already a year old and the rebound isn't expected to happen until this year's second half means that 2009 will be painful, because unemployment is projected to increase to 9 percent by year-end.
The sign that the economy has turned around will come when concerns will be about inflation and about the next asset bubble. In the meantime, the main concerns are unemployment, the risk of deflation, or of a generalized fall in prices and the lack of credit.
Isaac Cohen is the former director of the Washington Office of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). He is a commentator on economic and financial issues for CNN en Espanol TV and radio.