Former Fed vice chairman Alan Blinder has some good news and some bad news about the economy, and it’s the same news: We’ve hit bottom. Third-quarter GDP should turn positive, and the fourth quarter could even hold an upside surprise. Growth of 3% or even 4% is utterly plausible. It’s basic arithmetic, Blinder writes for the Wall Street Journal: The sectors that have been posting insane double-digit declines have to at least go to zero.
Housing fell 39% in the first quarter; a move to 0% growth would be a mammoth improvement, sending GDP up 1%. The same will happen with autos, investment banking, and inventories. “None of these events are probabilities; they are all certainties,” Blinder writes. The downside? We’re at the worst point of the worst downturn since 1938. Employment will take years to recover. “Few people have reason to smile. (Bankruptcy lawyers maybe?)”