NEW YORK–There is light at the end of the recession tunnel, butthe economy won't see it until the end of 2009, and even then itmight be dimly lit, according to an economic panel assembled byPrudential Financial.

The U.S. economy is 14 months into a recession that could lastfor the better part of 2009 before there is some recovery, arebound that “will be tepid by historical standards, according topanelist Edward Campbell, a vice president and portfolio managerwith Quantitative Management Associates, a unit of Prudential.

The reason, he explained, is because of the scope of thedeleveraging that the economy still needs to undergo in spite ofthe tremendous stimulus that the government has already given theeconomy.

In order for the equity markets to rebound, the credit marketswill also have to settle, Mr. Campbell said.

Tight credit markets and a deep recession that caused declinesin a broad range of investments pared $30 trillion in paper wealthfrom investors, he said during the panel discussion.

Four anticipated consecutive quarters of GDP decline, includinga 6-to-7 percent drop in fourth-quarter 2008 and a possible 5percent decline in first-quarter 2009, speak to the depth of therecession, he added.

In spite of the severity of the downturn, don't look for arepeat of the 1930s and the Great Depression or a “Japanese styleloss of a decade” that occurred in the 1990s when the Japaneseexperienced protracted deflation, according to Mr. Campbell.

The reason, he said, was because government took a wide range ofsteps including dropping interest rates to near zero percent,“running the printing presses” and making currency available, andlending to the private sector.

Even so, the impact was felt in the way that participants in401(k) plans handled contributions and withdrawals, according toJames Cornell, senior vice president and chief marketing officerwith Prudential Retirement, a unit of Prudential Financial.

Mr. Cornell cited an AARP, Washington, report that because ofthe economy, 20 percent of respondents had stopped contributing toretirement accounts and that hardship withdrawals and loans againstplans are increasing.

Prudential found that the number of hardship withdrawals from DCparticipants increased 45 percent compared with numbers recorded in2007, he said.

But, Mr. Cornell continued, in the last four months of 2008,hardship withdrawals decreased and logins for economic calculatorswere 108,000–a 28 percent increase over 2007. Those calculatorvisits, he said, resulted in increases in contributions that were,on average, 4.2 percent.

While hardship withdrawals are down, that number tracksunemployment statistics and could increase if unemployment grows inthe first part of 2009, he confirmed.

Mr.Cornell also expressed concern that some companies aresuspending matching of contributions from their employees, sayingthat it will especially hurt new participants and new hires whomight decide not to contribute.

Edward Keon, managing director and portfolio manager withQuantitative Management Associates, agreed with Mr. Campbell thatthe government had taken steps to “avoid disaster” but that goingforward balance will need to be restored in several areas.

In the near term, the government had to address the financialcrisis, he said. “If the house is burning, you don't worry aboutwater damage to the furniture.”

But going forward, it would be better if the savings rate grewat a steady rate rather than experiencing a sudden jump because ofthe potential for a parallel drop in consumption and gross domesticproduct, he explained.

Balance is also needed in weighing risk and safety because toomuch emphasis on safety will stifle the economy and prevent it fromgrowing and flourishing, Mr. Keon said.