US 'to face 18-month recession'
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Some key sectors are downgrading their outlooks as households tighten their budgets. (AFP/Getty Images: Mario Tama, file photo)
According to an economist who predicted the current turmoil back two years ago, there is still a long way to go, and it doesn't look good.
And it's not a question of if, but when the United States will fall into a recession.
Everyone from US President George Bush to Prime Minister Kevin Rudd is using the word crisis at the moment.
Today's warning comes from Nouriel Roubini, a professor of economics at New York University.
He is best known as one of the economists who flagged the current crisis more two years ago, and now Professor Roubini says the world will be surprised by the severity of the recession ahead and the financial losses.
Professor Roubini says the US will be hit by the worst recession in decades, and he believes unemployment could surge to 9 per cent as the US sinks into a long stretch of dark economic days.
"I think we'll be lucky to avoid that L-shaped stagnation in the United States ... this point the recession train has left the station," he said.
"This is not going to be a short and shallow recession lasting only six months.
"This shape, it's going to be U-shaped, [and will last] at least 18 months, most likely 24 months.
"I see the most severe recession in the United States in the last 40 years coming ahead of us and that's going to make also financial condition even worse.
"That's why I think that markets are going to stop rallying soon enough when they realise the economy's really tanking right now."
Job cuts
And while Wall Street made a late recovery today, some key sectors are downgrading their outlooks as households tighten their budgets.
For example PepsiCo fell 14 per cent today, worried that consumers will cut back on snacks and drinks, and now PepsiCo is planning to slash more than 3,000 jobs as the US economy slows.
Microsoft and Intel are down 4 per cent today, amid signs that demand for computers will drop back, perhaps for the first time in a computer generation.
But as a result, Apple is planning to offer its first MacBook priced under $US1000 to win back budget conscious consumers with the Christmas shopping season about to get under way.
