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Economic conditions will continue to worsen until the second half of 2009, when the recession will end, senior economists at Wells Fargo & Co. predicted during an annual forecast teleconference yesterday. Some $2 trillion in government stimulus funding, pent-up consumer demand and resurgent consumer confidence will converge to create an economic turnaround some time in the third quarter, according to Jim Paulsen, chief investment strategist of Wells Capital Management. "It's like you're at a cookout and you're trying to get your charcoal going and you keep squirting on lighter fluid and all of a sudden it goes 'Poof!'" Paulsen said. He blames the current economic "paralysis" on "fear mongering" by federal officials, such as U.S. Department of the Treasury Sec. Henry Paulsen, this fall as they tried to convince Congress to pass the $700 billion Troubled Asset Relief Program to help shore up the U.S. financial sector. Eugenio Aleman, senior Wells Fargo economist, said he worries that not enough of the federal injection of hundreds of billions of dollars into the financial industry will make its way to U.S. consumers. "Current monetary policy will help only those households that do not need help: those that have plenty of money and have a stable job," Aleman said. "It will not help those who are struggling to make ends meet or have lost their jobs or may soon lose them because no financial institution is going to lend them money to buy a home, no matter what the interest rate is." The new administration should direct government spending toward creating jobs, he said. Scott Anderson, Wells senior economist, projected that the U.S. will lose another 3.7 million jobs next year, bringing the total for this recession to 5.5 million lost. The unemployment rate will rising to 8.8% by the end of 2009, he says.
