Texas has dodged the worst of the nation's severe current economic downturn, but the outlook this year is less optimistic.

The decline in the national economy is so severe that most Texas cities won't avoid recession, economists at a Moody's economic seminar in Dallas said Wednesday.

During 2008, Texas was one of the few states to stay above water in the steep economic downturn.

"It is weakening, though, very rapidly – so far it's barely holding its own," said chief economist Mark Zandi of Moody's Economy .com.

"I think it's conceivable that before it's all said and done that every state in the nation will be in recession," Zandi said. "I don't think that has ever happened.

"Not only is the downturn extremely severe, it is very broad-based across industries and regions."

At its annual Dallas economic outlook conference, Moody's, an independent supplier of economic analysis, said the Dallas-Fort Worth area was on the edge of recession at the end of 2008.

Despite rising unemployment and layoffs, Economy .com managing director Steven Cochrane said, the D-FW area and Texas are still outperforming most areas of the country.

"As weak as it may feel, you all are very fortunate to be in this economy," he said. "This sets up Texas to do well over the next two or three years even if the state falls into recession because conditions are so bad everywhere else.

"To get ahead, all Texas has to do is keep what it has."

Cochrane said Texas benefits from a relatively stable housing market and lower levels of consumer debt.

"Households in Texas aren't overly leveraged and should be able to maintain a reasonable rate of spending," he said. "In Texas, the decline [in wealth] has been minimal.

"The state should be able to get through this recession with just a mild downturn and get back up."

Moody's predicts that nationwide home starts and price declines will bottom out this year.

But there's still pain to come. About 3 million home mortgages were in default across the country at the end of 2008, Zandi said.

"Everything points to much higher foreclosures," he said.

Zandi estimates that the U.S. economic slide won't stop until next year.

"I think the job losses will continue through all of 2009 and will peak in the first quarter of 2010," he said. "I don't think the economy goes anywhere quickly in 2010.

"It will be basically a flat year with some improvement," Zandi said. "It won't be until 2011 until we get any measurable growth."

He also thinks the U.S. economy won't get back to full employment until 2013 or 2014.

"Current conditions are about as bad as I have ever seen it," Zandi said. "There is a reasonable chance this will go down in history as a depression."

So far, he's pretty satisfied with recent actions the federal government has taken to halt the economic plunge and heal the battered housing market.

"I think it's fair to say the responses are reasonably good," Zandi said. "By this time next year, I do believe the economy will stabilize.

"By two years from now, we will return to growth."

But beyond the government stimulus packages and proposed housing sector fixes, consumers and business owners have to feel more positive about the economy, he said.

"If confidence does not stabilize, nothing works."