We continue to believe the fourth quarter of 2008 and the first quarter of 2009 will mark the darkest hours of this recession. Output, employment and consumer spending will likely remain under pressure for all of this year and possibly into the early part of next year. The recession will eventually end and we see the bottom occurring in either the fourth quarter of 2009 or first quarter of 2010. The end of the recession, however, will not mark the end of the economy’s struggles. The unemployment rate is expected to rise throughout 2010, peaking at 10 percent or more.

Our outlook includes the impact of the recently enacted economic stimulus act. Reductions in payroll withholding will provide some modest support to personal and after–tax income in April and May, which will help moderate recent declines in consumer spending. Business fixed investment and commercial construction are expected to be somewhat weaker than our earlier forecast, reflecting the recent sharp downturn in factory orders and business confidence. Government spending has also been revised slightly higher, particularly during the second half of this year. Slower economic growth around the world is cutting into exports and we now expect international trade to subtract 0.6 percentage points from 2009 economic growth. The large downward revision to fourth quarter real GDP also lowered the growth trend, and we now expect real GDP in 2009 will contract 3.3 percent.