Job losses could be particularly brutal in the first half of the year. Last month, 60% of U.S. CEOs said they expected to cut workers in the next six months, according to the Business Roundtable. A number of companies, including Bank of America and United Airlines, have already announced layoffs for early 2009.
Even after the economy stabilizes, job losses will probably continue for a while. That's common in recovery periods as wary businesses await more evidence that the economy is on solid footing. Employers cut jobs for nearly a year after the 2001 recession ended, for example.
"I don't know what is coming, so what we are trying to do is remain nimble and lean," says Andrew Field, CEO of Livingston, Mont.-based PrintingForLess.com. He employs 162 people full time, down from nearly 200 early in 2008.
Bright spots: The health care and education sectors will keep adding jobs.
The long-depressed housing market is widely expected to hit a bottom in 2009. But the rebound will likely be very slow and gradual, given rising unemployment and a sluggish economy.
"Housing will, to a certain extent, lead in this recovery," Wachovia Securities senior economist Mark Vitner says.
But initially, that won't be because the market is actually strengthening, as has been the case in previous post-recessionary periods, he says. "What gives us positive numbers in the second half of 2009 … is that housing stops falling," Vitner says
Housing construction, which has fallen off a cliff since peaking in early 2006, will flatten in mid-2009, he says. Wachovia anticipates the decline in sales of new and previously owned homes will bottom out around the same time.
While sales and construction are expected to flatten or edge higher, it's more murky as to when prices will stop falling.
The timing of the price recovery depends, in part, on how strongly state and federal governments step in to stop foreclosures, Vitner and other economists say. Wells Fargo senior economist Scott Anderson argues prices won't rebound until 2010 because home sellers will keep cutting prices to compete with banks selling foreclosed homes.
3. Consumer spending
Consumer confidence has taken an enormous hit in recent months, and Americans are expected to be tight with money early in the year, then slowly increase their spending.
The massive loss of wealth from the decline in stock and home prices has taken a huge toll on U.S. households. Net worth was down more than 11% in the July-September quarter from a year earlier, according to the Federal Reserve. When people are less wealthy — even on paper — they tend to spend less. And Americans finally are building up their savings — after years of spending more than they earned.
"When unemployment is high and confidence is low, people accumulate a little bit of a nest egg," National City chief economist Richard DeKaser says.
Retailers are bracing for the worst, with the most optimistic suggesting that the downward slide in sales will stop or at least slow in the second half of the year. But they're not taking any chances. Nearly all chain stores have scaled back plans to open stores. Some, including Sears and Ann Taylor, are expected to close stores well into next year and beyond. The liquidation company Hilco Appraisal Services recently predicted that 14,000 retail stores of all sizes will close in 2009.