There may be some light at the end of the long economic tunnel the nation has been experiencing, according to Dr. Martin Regalia, chief economist for the U.S. Chamber of Commerce.

Regalia, the keynote speaker at I-CAR's 30th anniversary event this summer, kicked off the conference with a cautiously optimistic forecast.

“We see an economy that is pulling out of what has been the worst economic downturn since the Great Depression,” Regalia said, noting that this recession has lasted 19 months, more than twice the length of those in the mid-1970s and early 1980s. “We should be bottoming out at the end of the second quarter or early part of the third quarter. And then we're going to see positive growth, I believe, in this third quarter, a little stronger growth in the fourth quarter, possibly averaging about 2 percent, and about that same rate of growth for the first half of next year.”

Regalia cited a number of reasons for his optimism. First, he said, price declines have boosted American's real incomes enough to spur some growth in consumer spending, which accounts for two-thirds of the nation's overall economy. Second, the “freefall” in the housing market appears to have bottomed out, with housing starts and home sales stabilized even if not yet improving. Though not thriving, the banking and financial markets, thanks to government intervention, averted a complete melt-down.

“People are only now starting to realize how close we were to the edge of the abyss: The entire capital market was dysfunctional,” Regalia said. “Had it stayed that way, we would have gone from the worst economic downturn since the Great Depression, to setting a new standard for ‘depression.'”

So while the economic outlook is generally not too bad, Regalia, said, don't look for a quick return to boom times. One analyst said a graph of the recovery may look like the tail-end of the Nike “Swoosh” logo.

“It's going to be slow by historical standards,” Regalia agreed.

He pointed to a couple of factors that will play into that recovery. First, since the end of 2007, the nation has lost 6.5 million jobs.

“Those are big, big numbers,” he said, adding that the potential loss of even more jobs was one of the reasons the Chamber supported the auto industry bail-outs. While the numbers of new unemployment claims appeared to be leveling off this summer, the unemployment rate will likely continue to rise until the end of the year or early in 2010, he said. He predicted it could be four or five years until the country surpasses its prior peak of employment numbers (compared to a 3.5-year recovery after the 2001 drop).

The other key concern as the economy recovers will be controlling inflation, Regalia said, which for the next 12 to 18 months doesn't appear to be a concern. But the fiscal and monetary policy now in place to stimulate the economy would likely lead to steep inflation, high interest rates and perhaps a “double-dip recession” if it's not pulled back at the right time, Regalia cautioned. Timing is challenging, he said, because ideally the change is made before it's clear it is needed, which can make “political pariahs” out of those controlling federal monetary and fiscal policy.

“But if it doesn't happen, we'll see inflation like in the 1970s and 1980s when it was up to 10 percent,” Regalia said. “In short, we've got an economy that is past the worst and is improving for a variety of reasons. We're likely to get an economic recovery that starts in the next month or two, but it's going to be slow by historical standards, and it's not going to be quick enough to generate rapid declines in the unemployment rate. So we're still going to be dealing with some economic problems even as we improve.”