Greenspan Sees Sharp Drop In U.S. GDP In Q4

U.S. gross domestic product will drop sharply in the fourth quarter, but hard-hit housing prices may start to stabilize in the first half of next year, former U.S. Federal Reserve Chairman Alan Greenspan said on Friday.

"We are in not quite a freefall but something fairly close to that," he told a business audience in Toronto, noting that there is no question that the United States is in a severe recession and that U.S. gross domestic product will drop significantly for the fourth quarter.

"It's clear, just looking at the trend in the monthly gross domestic product, it's sliding at an over 3 percent annual rate, and indeed the early data for October suggest that it's even more severe than that," he said.

"We know we're going down, and there's very little we can do about that."

The U.S. economy shrank 0.3 percent in the third quarter, the sharpest contraction in seven years, and payrolls data on Friday showed the U.S. jobless rate jumped to 6.5 percent in October, its highest level since March 1994.

In a wide-ranging question and answer session, the former Fed chief said U.S. housing prices could fall another 5 to 10 percentage points before stabilizing sometime in the first half of 2009.