In the World Economic Outlook report released on April 22, the International Monetary Fund (IMF) projected that the US economy would contract by 2.8 percent in 2009. This is the third consecutive times that the organization lowered its forecast for the US economy within six months.

A latest survey released by the Wall Street Journal showed that economists forecasted that the economy will not be able to recover enough to bring down unemployment until the second half of 2010.

The economists' forecasts indicate that the peak in the unemployment rate is likely to coincide with the midterm elections that will decide which party controls Congress -- possibly bad news for Democrats. Even if the economy is growing, Americans still will be feeling the effects of the recession and could blame the incumbent.

The first-quarter gross domestic product report, due from the Commerce Department on Wednesday, could offer some clues about what a recovery might look like.

Economists think GDP shrank at an annual rate of 4.6 percent in the first quarter, one of the worst since World War II, but not as terrible as the 6.3 percent shrinkage in the fourth quarter of 2008.

New uncertain factors arise

As people are wondering where the US economy might go following the report of mixed economic index in April, an unexpected epidemic disease brings new uncertain factors to the world economy. The outbreak of swine flu triggers worldwide alert in recent days.

"Fears over swine flu threatened to knock a vulnerable global economy into deeper turmoil, hammering travel and tourism as nervous consumers and businesses delayed spending plans," reported the Wall Street Journal.

Spooked investors dumped airline shares on Monday, fearing airline finances might suffer a new blow.

"This certainly could exacerbate the recession," said Sherman Chan, an economist with Moody's in Australia. "The next couple weeks will be crucial. If this (swine flu) persists it could become a more serious concern and really cripple the economy."

In a worst-case scenario, the US economy would shrink by an extra 0.3 percent this year, on top of a predicted 3.5 percent decline, says Brian Bethune, economist at IHS Global Insight.

This will inevitably transmit into the labor market and exert more stress on the spending of consumers.

Although one of the crucial goals of President Obama's New Dealis to create jobs, historically, employment always lags behind the recovery of the economy from a recession.

One of the biggest worries facing economists is what would happen if unemployment rises beyond expectations and unleashes another wave of spending contractions and lower corporate profits.

At present, the world is expecting the final result, due on May4, of the stress test of the big US banks, which seems to be not that positive as the share prices of Bank of America, Citi group and other banks fell Tuesday. However, the news about unemployment might be a bigger concern that deserves close watching.

(Xinhua News Agency April 29, 2009)