JPMorgan's Robert Mellman tops list of leading economists

WASHINGTON -- JPMorgan senior economist Robert Mellman tried to be optimistic in 2008, hoping the United States would avoid a deep recession. But once Lehman Bros. failed in September, he knew the economy was in for a rough ride.

Mellman and his partner, chief economist Bruce Kasman, quickly cut their forecasts for the economy for the rest of the year, predicting sharp interest rate cuts from Federal Reserve policymakers, who sliced their target for short-term rates to near-zero in December. The Fed is expected to keep rates at historic lows at the conclusion of their two-day meeting Wednesday.

Mellman and Kasman also predicted big drops in consumer and business spending and rising unemployment at the end of 2008. The deterioration turned out to be much larger than they thought, with gross domestic product, the broadest measure of the economy, tumbling at a 6.2% annual rate, the biggest drop in 26 years, in the October-December quarter.

But no one on USA TODAY's panel of economists saw such a rapid drop coming. And Mellman and Kasman's quick acknowledgment of the downturn helped make them the most accurate forecasting team in 2008 among the 36 teams and individuals who filled out the survey each quarter.

That makes the JPMorgan economists' predictions for 2009 worth paying attention to. They predict the economy will climb out of a recession in the second half of the year as fiscal and Federal Reserve stimulus kicks in. But it won't be pretty. Unemployment will continue to rise, lending is expected to remain constrained, housing will be slow to improve with a glut of homes on the market and exports will be soft given economic woes worldwide.

"For the person on the street, it will still feel like a recession," Mellman says. "I don't think it will be a joyful recovery. It will be pretty slow from here. It will be tough to get jobs for some time."

Says U.S. Chamber of Commerce chief economist Martin Regalia, who came in 10th place: "The recession is a very technical term for economists. The pain of the downturn is going to be felt well into 2010."