Standard Chartered Bank bolstered the case for recession a week later by affirming that ''The US economy in our view is heading into a recession.'' It also predicted that the recession will last longer than usual, extending well into 2009. Recessions typically last around 10 or 11 months.
The problem with predicting a recession is that no one knows for sure that one has occurred until several months or even a year after its inception.
But Merrill Lynch economist David Rosenberg has gone further than merely predicting a future slump, arguing that recession is already striking the economy by citing the surprising jump in unemployment during December.
''[The] employment report strongly suggests that an official recession has arrived,'' he said.
Some economists have set their eyes on more local markets, noting that several state economies are clearly in recession even if the national picture is more difficult to gauge.
According to Mark Zandi, chief economist for Moody's Economy.com, ''California, Arizona, Florida, Michigan, Wisconsin: they're in recession. [And] they account for 25% to 30% of the nation’s GDP.''
To be sure, the signs that the U.S. economy are slowing down are unmistakable: consumer confidence is reeling, holiday sales were at their lowest in five years, and the write-offs from the credit crunch and housing crisis are only expected to get worse from what is now an almost daily disclosure of losses totaling in the billions. Citibank announced its first-ever quarterly loss on January 15 to the tune of $9.8 billion, with thousands of layoffs expected to follow.
Additionally, the stock market has also been off by five percent since the beginning of the year, its worst showing since the recession of 1991. On top of all that, oil prices continue to flirt with the $100-per-barrel mark, and unemployment unexpectedly rose in December. The price of gold, often cited as a barometer of recessions (during which investors prefer to keep their assets in more secure forms), also closed at a record high last week, rising above $900. Inflation has also risen in the past year to levels not witnessed in 26 years. Clearly, the immediate future of the economy is anything but certain.
Recent polls indicate that the growing economic woes are also taking their toll on consumer confidence, which has recently dipped to an all-time low. The implications of a struggling economy don’t end there: the economy is now on par with (and in some polls even surpasses) the Iraq war as the number one issue on voters’ minds this election year. Presidential hopefuls have been quick to note growing anxiety about the immediate economic future, unveiling their own plans designed to spur economic growth and relieve the financial burden on the middle class.
Hillary Clinton, for example, unveiled a stimulus package on January 11 proposing $70 billion in emergency spending to help victims of the housing crisis. Several days later, Barack Obama offered his own economic package totaling $75 billion, which includes worker tax credits, pension supplements, and aid to the growing number of homeowners facing foreclosure. Populists like John Edwards and Mike Huckabee have taken their economic messages directly to workers, vowing to undo corporate tax cuts which have placed the majority of taxes on the middle class, the members of which account for approximately 70% of national spending.
Another key indicator of financial struggle is credit card debt, which rose by an alarming 11.6% in November, following a rise in auto loan debt of 5.1%. Total outstanding consumer debt totaled a staggering $2.51 trillion, a number which is doubly troubling when considering the fact that national debt is also at record levels. Whatever the final outcome of the economic predictions for the year, a change in the current situation cannot come soon enough.
