The U.S. government’s number mills were unusually silent last week, due in part to the Inauguration ceremonies in Washington D.C. The data that was released – housing data for December and January, and the weekly jobless claims data for the week ending January 17th – was unfortunately of little comfort for market participants looking for signs of a bottom in the U.S. economy.

Despite the bad news on the economy, the healing in the credit markets more or less contnued last week, albeit at a much slower pace than in prior weeks, keeping our base case for 2009 the U.S. economy and financial markets largely intact. Our base case for the economy – as detailed in the 2009 outlook, published in December 2008 – is for financial market panic that began in the Fall of 2008 – to subside in early 2009 allowing the U.S. recession to end by mid-year 2009, but not before the unemployment rate rises to between 8.0 and 9.0% (from 7.2% now) and housing prices fall another 5.0% before stablizing.

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