Just about the time government statistics found that American families' net worth had plunged $2.8 trillion, a group of economists predicted that the current recession may turn out to be the longest and most painful downturn since the Great Depression.
The decrease in net worth during this year's third quarter was fueled largely by plunging real estate values. The U.S. Federal Reserve reported that real assets lost $646.9 billion as home values plummeted in a wave of foreclosures. Nationwide, the average price of a single family home is now back to what it was in 2004.
And look out — the fourth quarter is likely to be even worse, the Fed said. Job layoffs increased sharply in October following the sudden Wall Street credit crises in mid September. So far this year, nearly two million U.S. jobs have disappeared.
The findings coincided with the release of the Wall Street Journal's latest economic-forecasting survey, which found economists expect the downturn to conclude in June 2009, marking an 18-month duration, the longest postwar period of decline.
The economists on average said the unemployment rate will peak at 8.4% in response to this recession, as pain in the labor market extends into 2010.
"For the household sector, this will be the worst event we've had in the post-World War II period," said Bruce Kasman of J.P. Morgan Chase & Co.
But at least the economists surveyed by the Journal said the situation could be worse.
"The downturn would be deeper still, in our view, were it not for an ultra-aggressive combination of monetary and fiscal stimulus that will soon move into high gear," Morgan Stanley economists Richard Berner and David Greenlaw said in a research note. "Authorities are pulling out all the stops: Quantitative easing by the Fed and the largest-ever fiscal stimulus package likely will promote stability in the economy late in 2009 and a moderate recovery in 2010."
On the employment front, the situation is still deteriorating. The U.S. Labor Department reported today that the number of Americans filing for first time unemployment benefits surged to 573,000. That's a 26-year high and the number of workers now receiving benefits is at its highest level since 1982.