In addition to changes in people's behavior, analysts said, the economy will continue to have trouble because its problems already have set off a sharp contraction in two industries -- finance and retail -- and those are likely to continue for several years.
The financial industry is likely to shrink by as much as 30% over the next several years, predicted Harvard economist Kenneth S. Rogoff, the former chief economist of the International Monetary Fund.
Rogoff said that the industry grew all out of proportion with its contribution to the economy in the last decade.
"We were told that we had this hyper-efficient, gold-plated financial sector," Rogoff said.
"If it was so efficient it should have been working like Wal-Mart, giving great service at very low cost." In fact, it was doing the opposite.
The result, Rogoff predicted, is that "the game's up for a lot of these companies."
As for retail, it had grown into one of the major employers in the economy as Americans saw their incomes and wealth rise and wanted to buy more stuff.
But with the incomes of the majority of Americans flat-lining and wealth declining as home values and investments plummet, the retail industry is likely to shrink as well.
"We expect 8,000 stores to close this year, which is probably a record," said Howard Davidowitz, head of Davidowitz & Associates Inc., a New York retail consulting firm.
"This will be the worst Christmas shopping season in a century," he predicted.
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peter.gosselin@latimes.com
Times staff writer Tiffany Hsu in Los Angeles contributed to this report.
