The United States economy officially sank into a recession last December, which means that the downturn is already longer than the average for all recessions since World War II, according to the committee of economists responsible for dating the nation’s business cycles.
In declaring that the economy has been in a downturn for almost 12 months, the National Bureau of Economic Research confirmed what many Americans had already been feeling in their bones.
But private forecasters warned that this downturn was likely to set a new postwar record for length and likely to be more painful than any recession since 1980 and 1981.
“We will rewrite the record book on length for this recession,” said Allen Sinai, president of Decision Economics in Lexington, Mass. “It’s still arguable whether it will set a new record on depth. I hope not, but we don’t know.”
As if adding a grim punctuation mark to what could become the worst holiday shopping season in decades, the Dow Jones industrial average plunged nearly 680 points, or 7.7 percent, to 8,149.09.
Part of the drop may have reflected profit-taking after last week’s surge in stock prices, but it also came in response to new data showing that manufacturing activity dropped to its lowest point in 26 years.
Both the chairman of the Federal Reserve, Ben Bernanke, and the Treasury secretary, Henry Paulson, vowed to use all the tools at their disposal to restore a measure of normalcy to the economy.
Mr. Bernanke, speaking to business leaders in Austin, Tex., said it was “certainly feasible” to reduce the Fed’s benchmark overnight lending rate below its current target of 1 percent, signaling that the central bank would lower the rate at its next policy meeting in two weeks.
And in an unusually explicit follow-up, Mr. Bernanke said the central bank was also prepared to use the “second arrow in our quiver” if policy makers have already reduced that rate, called the federal funds rate, to nearly zero.
I, personally, don’t trust Henry Paulson, have you ever noticed that he won’t look people in the eye when he’s talking about spending OUR billions of dollars?!