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It will be the end of 2009 before the nation starts to pull out of its recession, and even then, it will take several years for a robust recovery to set in, renowned economist Nouriel Roubini said Monday.
Roubini, named to Time magazine’s list of the world’s 100 most influential people and one of the first economists to forecast the current global economic crisis, disagrees with optimists who say the recession should be over this month, followed by rapid economic growth.
"The way I see and read the data, rather than many green shoots, I see also many yellow weeds," Roubini said in an interview on Monday.
In Madison for a speech Monday night on the UW-Madison campus, Roubini said the nation’s economy is not free-falling, as it was in the 2008 fourth quarter and the first quarter of 2009. "But I don’t think we’re yet at bottom," he said.
Households and corporations are carrying large amounts of debt and the government deficit is growing. Unemployment, already the highest in more than 25 years, hit 9.4 percent in May and is expected to reach 10 percent by August, peaking around 11 percent in 2010, Roubini said.
He said the government is doing the right thing by providing an economic stimulus to citizens, straightening out the banking system and dealing with the mortgage and home foreclosure crisis. But Roubini said the growing federal deficit is a major problem and will lead to high interest rates.
The government needs an "exit strategy," he said, starting in 2010, with a combination of tax increases and spending cuts.
Back in August 2006, Roubini was one of the few economists predicting "a rough ride" for the nation’s then-booming economy.
He noted rising corporate inventories and shrinking corporate investment, calling it an "ominous signal." He warned the bust in the housing market was worse than anticipated and wrote in his Global EconoMonitor Report that it would be "a crucial driver, both directly and indirectly, of the coming economy-wide recession that I am predicting." He foresaw mortgage defaults and the potential collapse of the financial system.
As it turned out, Roubini was right. "I’ve been spotting financial crises in emerging markets for more than a decade," he said Monday. "The U.S., in many ways, looked like the biggest emerging market of all. It was an accident waiting to happen."
Roubini’s appearance was sponsored by the UW-Madison School of Business and American Family Insurance. Roubini is a professor of economics at New York University’s Stern School of Business.
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