Robert Samuelson on the mixed outlook in today’s economy:

Consider the latest economic outlook from the forecasting firm Global Insight. Though not yet predicting a recession, it sketches an economy that won’t feel good for much of the 2008 election cycle:

– Housing’s slide continues. New home starts fall to 1 million, down from 2.1 million in 2005. By early 2009, home prices decline a cumulative 11 percent from their peak. On a median-priced home of $220,000, the loss is $24,000.
– Car and light-truck sales dip to 15.7 million, the lowest since 1998; they were 16.9 million as recently as 2005.
– Unemployment averages 5 percent, up from 4.6 percent this year.
– Pretax corporate profits decline 2.1 percent, the first decrease since 2001.

Moreover, Global Insight thinks there’s a 35% chance that the slowdown might become a recession. Two threats loom. One is oil. The forecast assumes that prices will fall from about $90 a barrel now to $76 in 2008. Every $10 above that is reckoned to raise gasoline prices 19 cents a gallon and cut employment by 100,000. The second threat is an aggravated credit crunch.

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