• Interest rates have dropped for the credit-worthy, with improved credit-market liquidity and a sharp drop in mortgage rates.

• Nearly historic average spreads for high-yield bonds "suggest that investors are finally being paid to take risk."

Paulsen predicted continued fallout from the crisis. And he called inflation a "distinct possibility down the road," but said it was unlikely this year and maybe not next year. As for the worrisome "second coming of the Great Depression," winning the lottery is probably more likely, he said.

In Utah, population growth slowed in 2008 with less in-migration and will continue to slow the first half of 2009, said bank economist and executive vice president Kelly Matthews. But Utah's continued high birth rate means more consistent household growth, which attracts business to Utah and will help it more quickly recover from the housing downturn.

Matthews predicts unemployment will be revised upward and there will be "minimal if any significant layoffs" in the short term. If mortgage rates drop as predicted to around 4.5 percent — Paulsen predicts as low as 4 percent — the housing crisis is likely to stabilize and begin to reverse.

The first-half 2009 Utah forecast also includes an estimated 10 percent drop in single-family building permits, a 1.3 percent increase in taxable retail sales and a slight drop in non-agricultural employment. The unemployment rate is expected to hover around 4.5 percent.

"We feel so crummy about the economy that it's likely to pass our expectations. We don't need good news," Paulsen said. "We just need news that's a little better than horrific and the markets will go up."

E-mail: lois@desnews.com