Economists See Mild Recession for U.S. in ’86

Growing federal budget deficits and a soaring U.S. trade imbalance will send America into a mild recession next year, the National Assn. of Business Economists said today.

The group said 58% of those responding to a survey believe the United States will suffer a mild recession next year.

NABE President Ben Laden told reporters that the economists believe the downturn will likely last only six months and will not be as severe as the recession the country experienced in 1981-82.

“We see this as an adjustment problem caused by the high trade deficit and the budget imbalances, not a sharp recession,” he said.

Laden said that even with expected negative growth for six months next year, the economy for all of 1986 is likely to expand, although at a weak 2.5% rate. He also forecast a rise in unemployment from the current 7.3% to 8% during the recession.

Deficit May Rise

The downturn will also make the government deficit problem much worse, Laden said, predicting that deficits will rise in the next three years, perhaps going as high as $300 billion in 1987.

The Reagan Administration, which has no recession in its forecast, is predicting that deficits will be declining and will be below $200 billion in each of the next three years.

Laden said the business economists’ forecast for a mild recession could prove to be overly pessimistic if interest rates drop further, the dollar declines and growth in other countries picks up more than is currently expected.

Laden said while the action by the Federal Reserve Board on Friday to cut its discount rate, the interest it charges on loans to banks, to 7.5% will help, it alone would not be enough to avert a recession next year.