A majority of the nation's forecasters are insisting that the current recession will end by August, basing their optimism on the behavior of past recessions. By their own acknowledgment, however, the forecasters are playing down the special troubling features of this recession that could prove them wrong.
The big rise in stock prices in recent weeks has reinforced the forecasters' view that this recession, the ninth since World War II, will be among the shortest, lasting less than a year.
Blue Chip Economic Indicators, which polls 50 prominent forecasters each month, shows that their consensus prediction in February is for healthy economic growth beginning in the third quarter -- assuming the Persian Gulf war ends by April 1.
"People are behaving as if there is something objective out there making the Dow Jones industrial average go up, but it's just animal spirits," said Paul Samuelson, the Nobel laureate in economic science. "The forecasters are taking the average length of the four mildest recessions since World War II and assigning it to this recession."
By sheer chance, the optimists may turn out to be correct. In fact, the consensus forecast has had an uncanny knack for predicting the beginning of past recoveries. But Samuelson and other economists contend that the outcome of this recession is harder than others to forecast -- and perhaps is unpredictable -- because it departs radically from the postwar norm in three main features: the huge quantities of unpaid bank loans, the resulting crisis for the nation's banks and the cutback in lending.