It’s bad, but thanks to a federal stimulus package ready to roll out the last week of January 2009, the U.S. economy will not fall into a depression.

“And I say that without hedging,” said Robert Allsbrook, chief economist for Regions Bank.

Allsbrook spoke to a group of about 50 Shelby County business leaders Wednesday morning at the Pelham Civic Center, gathered for the annual breakfast of The Partnership, part of the Greater Shelby County Chamber of Commerce.

“This is the worst part of the decline right now,” he said. “It’s going to get less worse – not better after this fourth quarter.”

The “no depression” message was about the only bright spot of Allsbrook’s talk. He predicts 2009 will be marked with continued declines in output and deflating prices, which combined create a “vicious, downward spiral.”

“If you feel good about the economy, maybe you don’t understand the situation,” Allsbrook said.

Consumers make up two-thirds of the U.S. economy and because of deflation, consumers have stopped buying goods and are waiting for lower prices, Allsbrook said.

“We see this every day as people are putting off filling up their gas tanks and waiting for the prices to go lower,” Allsbrook said.

He said the U.S. economy will emerge from this troubled time with permanent changes.

“We are working our way through a funeral process right now. We are going through permanent change in our economy, and we’re in the grief period.”

The consumer confidence index and the rate of credit card delinquencies are at record levels as unemployment rises.

“The labor market continues to slow, and it will get weaker,” he said.

More than 533,000 jobs were lost in the U.S. in November, the fourth-worse decline since February 1939.

He said the U.S. has another year to suffer through declining employment numbers, though the seven-county area making up Metro Birmingham will not see unemployment numbers as low as the national average.

Likewise, manufacturers are reporting sluggish new orders – the lowest order level since June 1988, which means declines in production by manufacturers.

The short-term future of the housing market could be described as “weak and bleak. Weak sales, weak construction, heavy inventory, bleak builder outlook and sharp price declines.

“There is no indication of a floor in the housing market,” Allsbrook said. “We must have government programs like we did in The Depression to get this going again.”

He said the reason for hope is the coming federal stimulus package, which will be unprecedented in its scope. The U.S. economy is beyond the point at which it could “fix itself.”

Allsbrook described the package as “massive, nothing like it since the FDR years.”

He said the package is ready to go as soon as the new administration is in place in January. The public works portion of the package, which he expects will fund the construction of bridges, highways and new schools, will begin pumping funds into the economy this spring, rather than the two years such projects typically take to get started.

That stimulus package will mean “enormous taxes in the coming years for middle, upper classes and corporations,” Allsbrook said, as well as increased government regulations for banking and other industries.

More of Allsbrooks’ opinions can be found on www.regions.com.

The Partnership, spearheaded by the Greater Shelby County Chamber, brings together municipal and state government, business and civic leaders in Shelby County in an effort to address shared concerns.