A portfolio manager at Prudential Financial Inc. says the shadows over the U.S. economy could start to lift in late 2009.

Edward Campbell, a vice president with Quantitative Management Associates, a money management unit at Prudential, Newark, N.J., gave that assessment here Tuesday during a panel discussion organized by Prudential.

The current U.S. recession could last for the better part of 2009 before there is some recovery, and the rebound likely “will be tepid by historical standards, Campbell said.

The government is doing all that it can to stimulate the economy, but the economy still must shed enormous amounts of debt, Campbell said.

Before the equity markets can rebound, the credit markets will have to settle, Campbell said.

Investment market turmoil has cost investors $30 trillion in paper wealth, Campbell estimated.

But Campbell rejected the idea that the current recession will be as severe as the Great Depression or Japan’s recent “lost decade.”

The government has reduced the risk of that kind of slump occurring, by promptly reducing interest rates to near 0% and “running the printing presses,” in effort to increase availability of currency and private-sector loans.

But James Cornell, chief marketing officer at Prudential Retirement, noted that AARP, Washington, says 20% of 401(k) plan participants have stopped contributing to retirement accounts because of the slump, and that hardship withdrawals and loans against plans are increasing.

Prudential found that defined contribution plan participant hardship withdrawals increased 45% between 2007 and 2008, Cornell said.

In the last 4 months of 2008, however, hardship withdrawals decreased, and use of economic calculators increased 28% from comparable 2007 levels, Cornell reported.

Calculator visits resulted in contribution increases averaging 4.2%, Cornell said.

Some employers’ decisions to suspend DC plan matching contributions also could hurt participation levels, especially by new hires, Cornell said.

Edward Keon, a managing director at Quantitative Management, agreed with Campbell that the government had taken steps to “avoid disaster,” but he said the government needs to restore balance.

“If the house is burning, you don’t worry about water damage to the furniture,” Keon said.

But, in the future, it would be better if the savings rate grew at a steady rate rather than experiencing a sudden jump, avoid the risk of a parallel drop in consumption and gross domestic product, Keon said.

In related news, analysts at Conning Research and Consulting Inc., Hartford, are predicting that the weak economy could cut total U.S. life industry surplus and asset valuation reserve to $237 at the end of 2008, down 24% from the total recorded at the end of 2007.

The weak economy has hit annuity companies especially hard, Conning analysts report.