Upper Midwesterners should hunker down for a prolonged spell of hard times, according to the annual outlook report released today by the Federal Reserve Bank of Minneapolis.

The downturn we're suffering now will continue well into 2009, predicted the bank's economists who base their outlooks on statistical models as well as on surveys of business leaders, manufacturers and agricultural lenders in the Ninth Federal Reserve District. It includes Minnesota, Montana, North and South Dakota, northwestern Wisconsin and Michigan's Upper Peninsula.

"The outlook for local economies is dismal across most of the district, the worst in the 18-year history of the business leaders' poll," the report said.

Leaders polled across the region "look for business investment, employment and consumer spending to drop in their communities," it said.

"The pessimism is strongest in Minnesota and Wisconsin," the report said. "While economic conditions have slowed in Montana and the Dakotas, these areas are faring better, in large part, thanks to a relatively strong agriculture sector."

Here are some of the outlook's noteworthy points (we won't call them highlights):

• The already grim employment picture is expected to worsen next year. The job cuts aren't as deep yet as in some previous recessions, but this one isn't over.

• Recovery in the home building and residential real estate markets may be more than a year away.

• This year's manufacturing slowdown will continue into 2009. Manufacturing firms expect sharp declines in sales, employment and investment in plants and equipment.

There were a few brighter spots in the report:

• Credit still is widely available to businesses. The catch is that lenders have tightened standards. From the borrowers end of the picture, fewer consumers and businesses are seeking credit.

• Wages for those who have jobs and personal income should grow in 2009 for most of the district, only more moderately than in 2008.

• Inflation worries have eased as energy and commodity prices have decreased.

• Farmers had a good 2008. But along with their counterparts in manufacturing, they're worried about 2009.

So far, the current recession has stretched longer than the previous two recessions — in 1990-91 and in 2001 — which lasted for eight months. But the economy would have to contract through May in order for this to stand as the longest recession since World War II.

More details can be found in the January issue of the fedgazette, the bank's bi-monthly newspaper.