Pessimistic forecasts

Paul Krugman is warning of an extremely weak economy in the years ahead:

... a weird complacency has settled in on the state of the actual economy. We’re recovering, everyone says — no need to do anything more. Yet the outlook is extremely grim — not according to DFHs like yours truly, but according to the consensus of professional forecasters. Here’s what the Philadelphia Fed survey of forecasters says about inflation and unemployment, through 2012... Disastrously high unemployment, persisting years into the future... [Cue graph showing unemployment forecasted to stay above 9 percent through 2011.]

I'm not saying policy makers should be complacent - there should be more aid to states, extended unemployment compensation, continued fiscal and monetary stimulus. But keep in mind the record of forecasters. Here's the mean unemployment forecast of the Survey of Professional Forecasters at the trough of the 1974-75 recession, compared to the actual unemployment rate:

And here's the same graph for the trough of the 1981-82 recession:

My hypothesis is that the 2007-09 recession is more like the 1974-75 and 1981-82 recessions than the 1990-91 and 2001 recessions, because it's so severe. It's worth noting that at the trough of those recessions forecasters were very pessimistic about the unemployment rate, and, fortunately, very wrong. It's also worth noting how bad the professional forecasters did predicting the future path of unemployment in 2007Q4, on the eve of the current recession:

According to the SPF in 2007Q4, unemployment should be 5 percent now. Oops!