We have been in recession through whole of 2008, but we learned of it only early this month.  In other words, right now there is a lot of psychological reaction that is driving cutbacks and layoff.  I expect that first two months of 2008 will be really bad as we get bad news as a result of lousy holiday season but a recovery should start in March 2009.  I hope the Anderson forecast below is not correct.

According to Jim Christie of Reuters, “The “nasty” U.S. recession will tighten its grip next year as unemployment rises and weak home and stock prices imperil consumers, finance firms and debt-laden businesses, a UCLA Anderson Forecast report released on Thursday said. Additionally, a sustained retreat in prices for goods and services is a very real possibility that would further drag on the economy, according to the forecasting unit’s report. “Where only last quarter we were worried about inflation, we are now worried about its very rare opposite: deflation,” the report said. Falling prices would cut demand and discourage employers from hiring.”