Definitely

Some leading economists, like Jim Paulsen, are pointing out that the economy is not in that bad of shape and that only the housing and auto industries are badly hit. The numbers show that exports are up and many large corporations have large reserves of cash and are simply waiting for the economy to bottom out before they start taking advantage of the situation. Buy low… or better yet… buy at the lowest.

But the real problem is that the two areas hit by this pseudo recession have hit many of us in the gut and it’s caused a very serious reaction… maybe even an overreaction. The trouble with predicting the future of the economy in that this situation is that it’s never been seen before. The housing market bubbles have popped in America’s most expensive markets causing much of the middle class to reevaluate their spending and values.

Why December 2008? The holiday shopping season often illustrates the tone of consumer confidence. If the economy doesn’t bounce back in December large corporations will most likely buckle down and hold their money in reserve to weather the storm. We may even begin to see larger job layoffs which will trigger even more trouble in the housing, auto, and credit markets. We already seen major problems in luxury retail areas but if this continues that trend will continue into other areas.

Recovery from increasing job losses, foreclosures, and reduced spending will take time to fix. People will need to feel secure again in their jobs and houses before they’ll begin spending again and I suspect two years is a conservative number for people to get back on their emotional feet. So cross your fingers for us to have a great December and prepare to buckle down if we don’t.