www.nytimes.com/2008/03/08/business/08recession.html
Autos News Analysis Seeing an End to the Good Times (Such as They Were) Chris Livingston/European Pressphoto Agency Ben S Bernanke, chairman of the Federal Reserve, has sent signals in recent weeks that the Fed is ready to reduce the overnight federal funds rate when the policy makers meet on March 18.
report released Friday showed overall employment to be lower than it was three months ago. Every time such a slump has occurred since the early 1970s, a recession has followed -- or already been under way. And if the good times have really ended, they were never that good to begin with.
Census Bureau began keeping records in the 1960s, a prolonged expansion has never ended without household income having set a new record. For months, policy makers and Wall Street economists have been predicting, and hoping, that the aggressive series of interest rate cuts by the Federal Reserve would keep the economy growing, despite the housing bust. But the possibility seemed to diminish almost by the hour on Friday. Shortly after 8 am, the Fed announced yet another measure meant to unlock the struggling credit markets. At 8:30, the Labor Department released the unexpectedly poor jobs report.
JPMorgan Chase -- who only last week had told clients they thought the economy was still growing -- reversed course and said a recession appeared to have started earlier this year. Stocks fell when the markets opened at 9:30, recovered and then fell again, with the Standard & Poor 500-stock index closing down 08 percent. Traders became even more confident, based on the price of futures contracts, that the Fed would cut its benchmark interest rate three-quarters of a point, to 225 percent, when policy makers meet on March 18.
Based on the employment report, Mr Harris said, "there's a very high probability that we're in a recession now." Even the one apparent piece of good news in the employment report was a mirage.
Over the last year, the number of officially unemployed has risen by 500,000, while the number of people outside the labor force -- neither working nor looking for a job -- has risen by 13 million. Employment has risen by 100,000, but even that comes with a caveat: there are also 600,000 more people who are working part time because they could not find full-time work, according to the Labor Department. "The decline in the unemployment rate," said Joshua Shapiro, an economist at MFR, a research firm in New York, "should not be viewed as good news." Much of the economic stimulus put in place by the government will begin to take effect in the next few months, which does leave open the possibility that the country can still escape a recession. Policy makers have reacted quite quickly to this slowdown, relative to previous ones.
stimulus package negotiated by President Bush and Democratic leaders in Congress. The Fed has already cut its benchmark short-term interest rate five times since September, and such reductions typically take six months or more to wash through the economy. White House officials have predicted in recent weeks that the economy would avoid recession, but after the release of the jobs report, they offered a subtly different forecast.
The administration does expect growth in the current quarter to be slower than it had previously thought, before accelerating this summer. But he added that he remained hopeful that "growth will pick up, and pick up quickly." The most commonly cited arbiter of recessions is the National Bureau of Economic Research, a group of academic economists that is based in Cambridge, Mass. But committee members said Friday that it remained too early to know. The bureau defines a recession as a significant, protracted decline in activity that cuts across the economy, affecting measures like income, employment, retail sales and industrial production. "Given that definition, the committee can't possibly call a recession until it has been going on for a while," said Christina D Romer, an economics professor at the University of California, Berkeley. "There is no way to know if the downturn will be sufficiently long-lasting until it has lasted for a while." The committee did not announce the end of the last recession -- which came in November 2001 -- until more than a year-and a half later.
Northwestern University economist on the committee, said any announcement about the start of a new recession was unlikely before the last few months of 2008 at the earliest. Recent recessions have inevitably brought inflation-adjusted income declines for most families, which would be particularly painful given what has happened over the last decade. For a variety of reasons that economists only partly understand -- including technological change and global trade -- many workers have received only modest raises in recent years, despite healthy economic growth. The median household earned $48,201 in 2006, down from $49,244 in 1999, according to the Census Bureau. It now looks as if a full decade may pass before most Americans receive a raise.
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