The Coming Recession

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Jobs report doesn't look good...

Jobless Rate Hits 5 Percent, 2-Year High
4 Jan. 2008 WASHINGTON — Hiring practically stalled in December, driving the nation's unemployment rate up to 5 percent, a two-year high. The new figures fan fears the economy could slide into a recession.

Last month, employers added the fewest new jobs to their payrolls in more than four years, said the jobs report released Friday by the Labor Department. The report also showed that employment conditions are deteriorating, strained by a housing slump and credit crunch that are sapping economic strength.

The unemployment rate jumped from 4.7 percent in November to 5 percent in December, the highest since November 2005 after the Gulf Coast hurricanes dealt the country a mighty blow. Payrolls — both private employers and government — grew by just 18,000 last month, the worst showing since August 2003, when the economy suffered job losses as it struggled to recover from the 2001 recession.

The December employment picture was much weaker than economists were expecting. They were forecasting the unemployment rate to bump up to 4.8 percent and for employers to add around 70,000 jobs to their payrolls.

Employers have grown cautious as they try to cope with fallout from housing and credit problems and rising uncertainty about how the economy will fare in the months ahead. Galloping energy prices and bad weather in some parts of the country also probably figured into the weak job figures. Manufacturers, construction companies, financial services all cut jobs in December - casualties of the housing slump. Retailers also sliced jobs.

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Brutal selloff on Wall Street
January 4 2008: Dow tumbles over 250 points after weaker-than-expected jobs report revives recession worries. The Nasdaq plunges.

Stocks tanked Friday, with the Dow shedding over 250 points, after a weaker-than-expected December jobs report exacerbated worries that the economy may be falling into recession.

The Dow Jones industrial average (INDU) tumbled 2 percent, according to early tallies. The broader S&P 500 (INX) index lost around 2.5 percent. The Nasdaq (COMPX) composite lost 3.8 percent and saw its biggest single-day decline on a point basis in at least 5 years.

The Russell 2000 (RUT.X) small-cap index fell 3.2 percent. A weaker-than-expected unemployment rate sparked a big stock selloff. Bonds rallied, as investors sought safety and the dollar fell versus other major currencies. Oil and gold prices retreated from recent records.

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Historically low but also historically an early sign of recession...

Unemployment Rises to Clinton-Era Levels, Still Historically Low
January 07, 2008 - Unemployment grew to 5 percent in December, a number that politicians are using to gain support in this year's elections.

Some critics, meanwhile, note that 5 percent is still a relatively low rate, historically, in an overall strong economy while other critics say it indicates a longer and deeper downturn in the economy. Sen. Hillary Clinton (D-N.Y.) called the job growth numbers "anemic" and said that if elected president, she would do more to grow the economy.

According to the Bureau of Labor and Statistics, the number of unemployed persons increased by 474,000 to 7.7 million in December, and the unemployment rate rose by 0.3 percentage points to 5 percent. A year ago, the number of unemployed persons was 6.8 million, and the jobless rate was 4.4 percent. "They impact the aspirations, hopes, and economic securities of scores of hard-working American families," Clinton said of the numbers. "It is long past time to change the Bush-Cheney economic strategy of 'too little, too late' for all but the most privileged."

"We need a new beginning on the economy, and a president that never stops fighting to lift the jobs, wages, health care and aspirations of America's hard working families," she said in a statement last Thursday. But John Berlau, director of the Center for Entrepreneurship at the conservative Competitive Enterprise Institute, said that while the data point to slowing growth, "we are far away from a recession." He noted that the unemployment rate was consistently above 5 percent during the first five years of the Clinton administration.

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Bush Acknowledges ‘Mixed Signals’ on Economy
January 7, 2008 — Dampening the administration’s customary upbeat tone on the economy, President Bush acknowledged Monday that the economic signs were “increasingly mixed,” but he also suggested he would oppose Democratic initiatives to increase spending to head off a recession.

Mr. Bush’s remarks, at the Union League Club here, came as the House speaker, Nancy Pelosi, said Democrats would propose measures to help “those affected by the economic slowdown” but left unclear what precisely the Democrats would come up with when they return to Washington next week. In New Hampshire and elsewhere, the Democratic presidential candidates have also increasingly begun warning of a possible economic downturn and the need for actions in Washington, though they too have not been specific.

Mr. Bush’s comments insured that the economy would become an even more central issue in the campaign and Washington as Democrats and Republicans scramble to figure out how to address rising oil prices, the home mortgage crisis, a weakening job market and recession fears. Mr. Bush, in his speech, told business leaders that while the fundamentals of the economy remain strong, “recent economic indicators are increasingly mixed” and the nation faces economic uncertainty.

“We cannot take growth for granted,” he said. “We confront economic challenges from the downturn of the housing sector, the high energy prices to painful adjustment in some of the financial markets.” Though Mr. Bush did not warn of a recession — as some economists have — his speech, coupled with a separate address in New York by the Treasury secretary, Henry M. Paulson Jr., was a marked shift from their most recent optimistic assessments.

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It's gonna take 2 years to figure it out???

Bank report says U.S recession is here
Tuesday 8th January, 2008 - An American bank claims the U.S is now in recession.

One of the major banks in the U.S, Merrill Lynch, says the feared recession arrived with last Friday's employment report. The employment report sent shares tumbling worldwide.

While Merrill Lynch believes the U.S is now in its first month of recession, other banks disagree.

An official ruling on whether the U.S in recession is made by the National Bureau of Economic Research, but this decision may not come for two years. The bureau defines a recession as a significant decline in economic activity, lasting more than three months.

Bank report says U.S recession is here

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U.S. recession to spread globally...

UN Sees Risk of Global Recession
09 January 2008 - A new U.N. report says the risk of global economic recession is rising. The report, by the U.N. Conference On Trade and Development, says international trade is expected to slow and the world economy to cool off.

World economic growth was robust last year. The report notes more than 100 economies achieved three percent growth or more. And growth in developing countries rose on average nearly seven percent. Africa, it notes, grew by nearly six-percent and is expected to exceed that figure this year. But, the U.N. Conference On Trade and Development says there is a clear danger of the world economy coming to a near standstill in 2008.

The report says this will hit many poor nations hard, slow world trade and put an end to the boom in commodity prices. Heiner Flassbeck is an official at the U.N. agency. He says the major uncertainties for 2008 arise from the U.S. economy.

"We have seen already a crisis in the third quarter of last year, the so-called sub-prime crisis," he noted. "This has sent some shock waves all around the world and these shock waves have had already a number of repercussions that could lead to a much worse outcome in 2008." U.N. economists say significant spillover effects from the problems in the U.S. mortgage markets have spread to major European countries and, to a lesser extent, to Japan and other developed economies.

Flassbeck says the world can no longer count on the United States as being the sole locomotive of the world economy. He says Japan and Europe have to do more to take over this role. But, he adds, there is no sign yet that other major developed economies are strong enough to replace the United States as the engine of global growth. He says the world economy would suffer a severe blow if the United States were to go into recession.

More VOA News - UN Sees Risk of Global Recession

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U.N.: U.S. decline could moderate China's economic growth in 2008
Jan. 9, 2008 -- China might see a "significant dent" in its economic growth rate, if the U.S. economy slides into a recession, said the United Nations in a report released on Wednesday.

China is expected to grow at a robust pace of 10 percent in 2008, moderating from the 11.4 percent growth estimated for 2007, said the report entitled World Economic Situation and Prospects 2008. The annual report also considered a more pessimistic scenario under which housing prices in the United States make a more significant dive and push the U.S. economy into a recession in 2008. Should this happen, economic growth in China would drop below 8 percent in 2008.

In the baseline forecast, the UN's prospects for the Chinese economy in 2008 remain positive overall. Fixed investment continues to be a key growth driver. Private consumption, which was relatively weak in the past compared with other components of GDP, will strengthen due to a strong growth in wages and the positive wealth effects from the significant rise in stock prices over the past two years.

The U.N. report said the weight of the Chinese economy in the world has been steadily increasing. China contributed about 17 percent to global growth in 2007, about the same as the United States. China's trade with the rest of the world has been growing three times as fast as the world average since its accession to the WTO in 2001. If it keeps up the momentum, China will become the largest exporting economy in 2009.

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Gonna be worse than they told us?...

Federal Reserve chief says economy does not look good
Thursday 10th January, 2008 - Federal Reserve chief Ben Bernanke has said that the outlook for the U.S economy in 2008 has worsened.

Mr Bernanke said his collected facts suggested the opportunities for real growth had deteriorated and the risks of inflation had become more pronounced. In particular, Mr Bernanke highlighted the impact the slowing housing market and specifically the sub-prime mortgage crisis continued to have on the wider economy.

His comments in Washington have come on the heels of reports by leading investment banks over an impending recession. When asked if he was concerned about a possible recession, Mr Bernanke said the Federal Reserve was not currently forecasting one. Earlier this week, Merrill Lynch controversially said the U.S had already entered a recession, while Goldman Sachs has also suggested it is heading in that direction.

However, Mr Bernanke said the central bank was willing to act in a decisive and timely manner to ensure the economy remained on an even keel. Analysts said this was a strong sign that the Fed would cut interest rates again when it meets later this month. The bank has already cut rates three times since last summer, most recently in December to 4.25 percent, which is the lowest level in two years.

Federal Reserve chief says economy does not look good

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Hail Mary -- Fed To Cut Interest Rates?...

Fed Chairman Bernanke Plans Rate Cut
Jan. 10, 2008 - In a Speech Thursday, Bernanke Said He Will Cut Rates to Keep U.S. Out of a Recession

In a speech on the state of the American economy this afternoon, Federal Reserve Chairman Ben Bernanke promised to again cut interest rates to help the nation cope with the continued housing problems and as part of an effort to stop the country from plunging into a recession. "The market strains have been serious, and they continue to pose risks to the broader economy," Bernanke said today during the speech at the Women in Housing and Finance and Exchequer Club joint luncheon in Washington.

The Federal Reserve is not currently forecasting a recession but in response to a question of whether he expected one, Bernanke said you can't really make a determination about such an event until after you are in it. To bolster the economy, the Federal Reserve lowered its key rate three times last year. Its last cut on Dec. 11 left the rate at 4.25 percent, a two-year low. Bernanke signaled again today that the Fed is likely to make further cuts.

"In light of recent changes in the outlook for and the risks to growth, additional policy easing may well be necessary," Bernanke said. "We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks." The Fed meets Jan. 29 and 30, and Wall Street has been hoping for a further half-point — or even more — cut in interest rates.

Rising Unemployment

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Some would argue the fallout from the subprime crisis is evidence it is already here...

Is America Bound for Recession?
Sunday, Jan. 13, 2008 — The unemployment rate leaps to a two-year high, record numbers of people are forced from their homes and Wall Street nose-dives again. Such is the fallout from a housing meltdown that threatens to slingshot the country into a recession.

The big economic question these days is whether the weakening economy will survive the strains or collapse under them. The odds have grown that the economy will slip into a recession. At the beginning of last year, many economists put that chance at less than 1-in-3; now an increasing number says it has climbed to around 50-50. Goldman Sachs, the biggest investment bank on Wall Street even thinks a recession is inevitable this year.

Hopeful it can be avoided, President Bush and the Democrat-controlled Congress are exploring economic rescue measures, including possible tax rebates. Federal Reserve Chairman Ben Bernanke pledged to lower interest rates as needed. The idea is to induce people to boost spending, especially on big- ticket items such as homes and cars, and revitalize economic activity.

"The recession gorilla is there. The question is can the Federal Reserve do enough to avert a recession?" asked Brian Bethune, economist at Global Insight. "We think the odds are close to 50 percent that there will be a recession. It is high — no question about it." Much hope rides on the Fed. By dropping rates, it can act quickly — faster than Congress or the White House could agree on and deliver an economic boost.

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Automakers hold out hope for U.S. economy
Sun Jan 13, 2008 - As the Detroit auto show opens on Sunday, major global automakers are set to unwrap glittering new vehicles that span the gamut of styles from the gas-hogging fast to the gas-free green.

But the uninvited theme hanging over the industry's largest annual trade show is whether the U.S. market for cars and trucks will spin into the kind of steep downturn this year it has managed to avoid for the past decade and a half. U.S. auto sales fell for the second consecutive year in 2007, dragged down by a slowing economy, a slumping housing market and tighter credit markets that pinched less credit-worthy borrowers.

While the consensus view among Wall Street analysts and high-profile investors points to a further decline in the world industry's single-largest market in 2008, there is still a debate about how deep it will go -- especially if the U.S. economy tips into outright recession. Sales of cars and light trucks in the United States slipped to 16.15 million vehicles in 2007, down 2.5 percent from the year earlier.

Many analysts and some industry executives see a risk for a drop down to near 15.5 million vehicles this year, although some automakers like General Motors Corp. (GM.N) are still banking on stronger demand in the second half to prevent that kind of downturn and hold sales nearly flat.

"Comments at the Detroit auto show will likely reinforce our negative outlook for the U.S. market in 2008," Lehman Brothers analyst Brian Johnson said in a note for clients last week. "We indeed expect significant further weakness in U.S. auto sales this year, due to a likely consumer credit tightening, combined with the (automakers') resolution not to step up with incentives."

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Not gettin' any better anytime soon...

'It's going to be much worse'
January 31 2008: Famed investor Jim Rogers sees hard times ahead for the United States - and a big opportunity looming in China.

You might expect Jim Rogers to be gloating a little bit. After all, the famed investor has been predicting a recession in the U.S. economy for months and shorting the shares of now-tanking Wall Street investment banks for even longer. And with fears of a recession sparking both a worldwide market sell-off and emergency action from Federal Reserve chairman Ben Bernanke, Rogers again looks prescient - just as he has over the past few years as the China-driven commodities boom he predicted almost a decade ago began kicked into high gear. But when I reached him by phone in Singapore the other day there was little hint of celebration in his voice. Instead, he took a serious tone.

"I'm extremely worried," he says. "I have been for a while, but I just see things getting much worse this time around than I expected." To Rogers, a longtime Fed critic, Bernanke's decision to ride to the market's rescue with a 75-basis-point cut in the Fed's benchmark rate only a week before its scheduled meeting (at which time they cut it another 50 basis points) is the latest sign that the central bank isn't willing to provide the fiscal discipline that he thinks the economy desperately needs.

"Conceivably we could have just had recession, hard times, sliding dollar, inflation, etc., but I'm afraid it's going to be much worse," he says. "Bernanke is printing huge amounts of money. He's out of control and the Fed is out of control. We are probably going to have one of the worst recessions we've had since the Second World War. It's not a good scene." Rogers looks at the Fed's willingness to add liquidity to an already inflationary environment and sees the history of the 1970s repeating itself. Does that mean stagflation? "It is a real danger and, in fact, a probability."

Where the opportunities are

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U.S. Economy Suffers Another Body Blow
WASHINGTON, Feb. 1, 2008 - Employers Cut 17,000 Jobs In January - First Such Reduction In More Than 4 Years

Nervous employers cut 17,000 jobs in January - the first such reduction in more than four years and a fresh trouble sign that the U.S. economy is in danger of stalling. The Labor Department's report, released Friday, also showed that the unemployment rate dipped slightly to 4.9 percent, from 5 percent, as the civilian labor force shrank slightly.

Job losses were widespread. Manufacturers, construction firms and a variety of professional and business services eliminated jobs in January - reflecting the toll of the housing and credit debacles. The government cut jobs, too. All those cuts swamped job gains in education, health care, retailing and elsewhere. Wage growth also slowed, another indication that employers are tightening their belts amid the economic slowdown.

President George W. Bush called Friday's negative job report "troubling," saying it ends a 52-month streak of job growth. "Inflation's low. Productivity's high, but there are certainly some troubling signs, serious signs that the economy is weakening and that we've got to do something about it," Mr. Bush said. He prodded Congress to pass an economic stimulus package that had been negotiated by House Democrats and Republicans but which is under the microscope in the Senate as members seek to expand the pool of Americans eligible for tax rebates and other economic relief.

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Gonna be tough for a long while to come...

Why job market is even worse than you think
February 2 2008: Nation's first job loss in more than four years tells only part of the story of the weak labor market. The ranks of the long-term unemployed are growing.

A government report on January jobs showing that employers trimmed payrolls for the first time in four years set off alarm bells. But the report, which was released Friday, tells only part of the story about the underlying weakness in the labor market.

The number of Americans out of work for at least six months is rising - reaching levels more typically seen deep into a recession or period of job contraction, not at the beginning. And while some economists believe that the drop in jobs reported in January might later be revised away to show a narrow gain, it's clear that the rise in long-term unemployment is a far more established trend and one economists say isn't going away anytime soon.

Harder to find a new job. The number of long-term unemployed stood at a seasonally-adjusted 1.4 million in January, up about 21% from year-earlier levels and up 3% from the previous month. The full-year average for 2007 was 1.2 million long-term unemployed, nearly double the reading for 2000 - just before the last recession. For all of 2007, about 17.6% of those who were unemployed had been out of work six months or more. That compares to only 11.4% who were long-term unemployed in 2000.

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Granny says, "Maybe ending NAFTA would aid the economy...

Will more jobless benefits aid economy?
3 Feb `08 WASHINGTON - For a bipartisan majority of senators, providing three months or six months of extra unemployment checks to more than 1 million jobless people is a better way to dig the economy out of a recession than just printing tax rebate checks.

Some economists agree, and undoubtedly, so do the nearly 1.3 million unemployed workers who face losing an average $282 a week in benefits before June. But there is strong opposition leading up to a Senate vote in the week ahead on whether to add an extension of jobless benefits to a $161 billion House-passed combination of tax rebates and business tax cuts.

Consider Deborah El, a 64-year-old diabetic who lives in Pittsburgh. She will exhaust her 26 weeks of regular benefits this month after being laid off from her job as a program coordinator at a nonprofit literacy agency. El is taking care of her 26-year-old disabled daughter, Orissa, while also looking for a job and trying to find a new place to live.

"I don't know what I'm going to do. I'm really scared," she said. "I've never been like this before. I've always been employed, I've always worked. I went back to school a few years ago and got a master's degree, but it doesn't mean anything." As the economy has slowed, more people have signed up for jobless benefits. The situation can only get worse given the report last week that employers payrolls by 17,000 in January — a job loss not seen since the tail of the last recession in 2003.

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No guarantee it will spur the job market...

Stimulus plan may not lead to many new jobs
February 4 2008: Even if $150B tax rebate plan gives economy a shot in arm, it won't necessary prompt employers to add staff.

Most economists agree that the stimulus package now working its way through Congress will boost the economy. How many jobs it will create, however, is up for debate. The Bush administration has estimated that the stimulus package will add 500,000 jobs to the economy. Last Friday's jobs report showed U.S. employers trimmed 17,000 jobs from their payrolls in January. That fed new fears that the economy may be on the cusp of recession, if it hasn't fallen into one already.

President Bush and other politicians argued Friday that the drop in employment is further reason to pass the $150 billion stimulus plan, which is equal to about 1% of the nation's gross domestic product (GDP). The thought is that if consumers have more money to spend once they get their rebate checks later this summer, some businesses, especially retailers, will need to hire new staff to deal with increased demand.

But many economists argue that companies won't hire more permanent workers just because taxpayers may look to quickly spend their one-time rebate of about $600. "Businesses don't change their hiring or investment habits for a one-check pony," said Rich Yamarone, director of economic research at Argus Research. "There's no overriding need to hire workers for anything more than a temporary basis."

Temporary cut, temporary impact

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Congress giveth, China taketh away
February 4 2008: Many Americans believe any rebates from tax stimulus will benefit Beijing more than Baltimore and Bakersfield. Here's what some experts say.

Some critics are convinced that any tax rebate checks from Congress will go straight to China if Americans take the extra money and splurge at the mall. But trade experts dismiss that idea as a narrow-minded characterization of the global marketplace. "To say that the money you spend at the register will go to China ignores all the other segments of the U.S. economy that [the rebates] will benefit," said J. Craig Shearman, with the National Retail Federation (NRF).

Goods from China, which is America's largest source of imports, accounted for a sizeable 14% of all U.S. imports last year, mostly consumer goods that included toys, clothing, footwear and electronics. Those Chinese-made items are probably what consumers will buy more of with their rebate money. The proposed $146 billion stimulus package - so far approved only by the House - is designed to stave off a possible recession by lifting consumer spending at home, partly by giving some taxpayers rebates of between $600 to $1,200.

One fair trade proponent - Alan Tonelson, with the U.S. Business and Industry Council - said in a recently published article that Americans should "accept that many of the stimulus' benefits will leak overseas." That sentiment is echoed by many Americans. Just last seek, one CNNMoney.com reader wrote, "The refund checks [are] a great way to provide stimulus for the Chinese economy. Everybody will run to Wal-Mart or other big box stores and spend their extra cash on products made in China or elsewhere."

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