Local economist sees some reason for hope

The Reagan administration was somewhat notorious for providing "wildly optimistic" economic and financial forecasts, Nevada State Bank economist Jeff Thredgold said in his latest Tea Leaf newsletter.

Anyone trying to understand and predict the U.S. economy for a long time will remember the days of  the “rosy scenario.” Such forecasts had little to no credibility on Wall Street, Thredgold said. More realistic and credible forecasts began to emerge from Washington during the past 15 years.

Thredgold thinks the recent forecast from the Congressional Budget Office is almost too negative. The CBO projects that the U.S. economy will contract at a 2.2 percent real (after inflation) annual rate during 2009. Most private sector forecasts suggest a lesser decline. The forecast sees the U.S. economy leaving recession at mid-year 2009 and expanding at a modest 1.5 percent real annual rate during 2010.
 
The CBO also forecasts that the budget deficit for fiscal year 2009 will reach $1.2 trillion, even before any additional stimulus is requested by President Obama, and presumably approved, in coming weeks. "This number, unfortunately, seems accurate," Thredgold said.

The CBO forecasts the unemployment rate will reach 9.2 percent in early 2010, with average home prices likely to decline another 14 percent over two years. "The latter number seems a bit too painful when considering the declines that have already occurred," Thredgold said.