Posted on 01/08/2008 12:55:00 PM PST by blam
Recession in the US 'has arrived'
Merrill said Friday's employment figures confirmed the recession
The feared recession in the US economy has already arrived, according to a report from Merrill Lynch. It said that Friday's employment report, which sent shares tumbling worldwide, confirmed that the US is in the first month of a recession.
Its view is controversial, with banks such as Lehman Brothers disagreeing.
But a reserve member of the committee that sets US rates warned that it could do little about the below-trend growth expected in the next six months.
"I am concerned that developments on the inflation front will make the Fed's policy decisions more difficult in 2008," Charles Plosser, president of the Federal Reserve Bank of Philadelphia said.
He was referring to the problems faced by the US Federal Reserve, which might want to cut interest rates to avoid a recession, but is worried about inflationary factors such as $100-a-barrel oil.
'Significant decline'
An official ruling on whether the US is in recession is made by the National Bureau of Economic Research, but this decision may not come for two years.
The NBER defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months".
It bases its assessment on final figures on employment, personal income, industrial production and sales activity in the manufacturing and retail sectors.
Merrill Lynch said that the figures showing the jobless rate hitting 5% in December were the final piece in that puzzle.
"According to our analysis, this isn't even a forecast any more but is a present day reality," the report said.
'Actual downturn'
But NBER president Martin Feldstein denied Merrill's claims.
"I think we're not in a recession now," he told CNBC.
"But I think there is a serious risk that it could get worse and we could see an actual downturn," he added.
Merrill said that the current consensus view on Wall Street that there is a good chance of avoiding a recession is "in denial".
It also objected to the use of euphemistic terms for the state of the economy.
"To say that the backdrop is 'recession like' is akin to an obstetrician telling a woman that she is 'sort of pregnant'," the report said.
Housing figures
There were further signs of the housing slowdown that has sparked off the problems in the US economy in home sale figures.
Pending sales of existing homes fell 2.6%, according to the National Association of Realtors, which saw its pending sales index drop to 87.6 in November, 19.2% below the point it was at a year ago.
The figures were better than expected, however, because October's index reading was revised upwards from 87.2 to 89.9.
Anyone that takes the BBC seriously on any topic, let alone the American Economy, needs their head examined.
“Everything that should be up is down and everything that should be down is up!”
Vote for the third party - It can’t get any worse....
Oh sorry - flashbacks..
Well, hell, if you’re in sales, sell, sell, sell now, before your prospects decide there is a recession.
So Merrill Lynch doesn’t know the definition of a recession?
I said to short the index futures on December 12th, and reiterated that this morning. Hope someone listened.
Well, if the BBC says so, it must be a lie.
The stock market continues to decline as we head into the final half-hour of trade. The comments made by AT&T's (T 38.07, -2.96) CEO fueled broad-based selling pressure.
AT&T's CEO said the company is disconnecting more home phone and broadband Internet customers for failing to pay their bills, according to Bloomberg.com. Traders are fearful that this may be a sign of recession. The telecom sector is currently down 6.7%, after being down more than 7%. It was in positive territory prior to the report.
5%?????? 5% has long been regarded as FULL EMPLOYMENT! People have gotten so used to an outstanding economy, that a better than average one is looked at like a recession. If people keep talking down the economy, they're going to get the recession the want. Consumer confidence is key.
Yeah? Well the rest of the world define a recession as an actual decline in economic growth for two consecutive quarters.
Merrill Lynch said that the figures showing the jobless rate hitting 5% in December were the final piece in that puzzle.
In a sane world, we used to call unemployment figures under 6% full employment!
What idiocy!
Ask 2 economists about Wall Street, and you'll get 3 opinions.
The economy grew at 4.9% last quarter, that's hardly a recession.
Between the Brit's opinion of our "quaint" political process and wishful thinking about our impendig economic recession I'm starting to grow very disgusted with the lot of them.
Conveniently just in time for an election year.
I know. All this tells you is the writers political affiliation.
You're right..5% is about full employment. 3.5-4% is scraping the bottom of the barrel.
Locally, we were at 2.8% for a period of time. It was tough to get service, anywhere. And the quality of service at places like retail + restaurants, stunk. Coincidence? I think not.
I thought the definition of recession was 2 consecutive quarters of negative growth?
Phew, it's only a Recesion. For a while there I thought it might be a Recession which is almost twice as bad. :O)
A Recession is two consecutive quarters of negative economic growth. The BBC is economically illiterate.
Only if a Dem is in the White House. If a Republican is president, a recession occurs at the whim of the media.
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