[A-List] Recession in the US 'has arrived'

["Charles Brown" <charlesb@xxxxxxxxxxxxxxxxxxxxx>]

http://news.bbc.co.uk/2/hi/business/7176255.stm
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. 

Meanwhile, US phone giant AT&T said it was now disconnecting a growing
number of home phone and broadband customers for failing to pay their
bills.