Jan. 4--Even the most optimistic observers hope that by the end of 2009, the economy will hit bottom and start to rebound -- the beginning of the end.

But considering climbing unemployment and foreclosures, declining spending and home values, most agree the economic situation will get worse before it gets better, saying that most of 2009 would be painful as the region and the nation move through a prolonged recession.

Anthony Liuzzo, Ph.D., business and economics professor at Wilkes University, said things will be bad, with mounting layoffs, more unemployment, tighter credit, and climbing personal and business bankruptcies.

"We may not be in as bad shape as some, and we have not felt the pain of the housing bubble that the coastal areas have, but that doesn't mean the recession is passing us," Dr. Liuzzo said. "I can say with absolute certainty things will not be good, and the recession will continue for two or three quarters."

Home prices

Northeast Pennsylvania may also face the brunt of the decline in home prices and values.

Austin Jaffe, Ph.D., director of the Institute for Real Estate Studies at Penn State University, said while real estate values in the state's metro areas, such as Scranton/Wilkes-Barre, remained stable through much of 2008, a decline had begun by year's end. In 2009, prices will slip further during the first two quarters, he predicted.

A number of forces are at play. Foreclosures, while modest compared to the rest of the nation, are rising, he said, putting more homes on the market, adding to an oversupply and further depressing values. In November, Pennsylvania saw 54 percent more foreclosures than November 2007. Rising unemployment will increase foreclosures even further.

"The original wave of foreclosures was due to subprime loans and resetting adjustable-rate mortgages," Dr. Jaffe said. "The coming wave will be from people who lose their jobs and can't pay their mortgage. This double whammy will create very weak conditions."

That's just part of the real estate pain. Dr. Jaffe said commercial real estate is showing signs of weakness and will be the next to take a hit.

Bright side

Some sectors of the economy do well in down economies -- "negatively correlated," as economists say. Those include education and health care, both major sectors in Northeast Pennsylvania. Dr. Liuzzo is the director the Wilkes University MBA program, which has seen an increase in applications. Typically, applicants are worried professionals who want to be more versatile employees and cut their chance of being a victim of job cuts.