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Goldman Sachs sees recession in 2008


Goldman Sachs sees recession in 2008

Reuters
January 9, 2008

Goldman Sachs on Wednesday said it expects the U.S. economy to drop into recession this year, prompting the Federal Reserve to slash benchmark lending rates to 2.5 percent by the third quarter.

In a note to clients, Goldman said real gross domestic product would contract by 1 percent on an annualized basis in both the second and third quarters. For all of 2008, the investment bank said GDP would rise by 0.8 percent.

The unemployment rate will rise to 6.5 percent in 2009 from the current 5 percent, it said.

The weakening economy will force the Fed to lower policy rates by an additional 1.75 percentage points from the current 4.25 percent. Starting in September, the Fed cut rates at the last three meetings of the Federal Open Market Committee, reducing the target rate on loans between banks by 1 percentage point from 5.25 percent.

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Merrill Lynch: Recession “Has Arrived”

BBC
January 8, 2008

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.

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.

It added 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.

 

National Bureau of Economic Research: “Odds Of Recession More Than 50%”

Bloomberg
January 7, 2008

Harvard University economist Martin Feldstein, head of the group that dates U.S. economic cycles, said the odds of a recession have risen to more than 50 percent after a report showing unemployment jumped in December.

“We are now talking about more likely than not,” Feldstein, president of the National Bureau of Economic Research, said in an interview in New Orleans two days ago. “I have been saying about 50 percent. This now pushes it up a bit above that.”

The jobless rate rose to 5 percent in December, the highest in two years, from 4.7 percent in November, a government report showed last week. Payrolls rose by 18,000, the least since August 2003.

The U.S. economic expansion is cooling after a third- quarter surge as the housing slump enters its third year and consumer spending slows. Former Federal Reserve Chairman Alan Greenspan and ex-Treasury Secretary Lawrence Summers are among those raising the prospect of a recession.

The increase in unemployment will hurt consumer confidence, Feldstein said in the interview. He was in New Orleans to speak at an economics panel discussion on productivity that was part of the annual meeting of the Allied Social Science Associations.

“Consumers, with essentially no growth in jobs in December, are going to be more nervous about the future,” said Feldstein, 68. “They are going to be a little more reluctant to spend, and that is going to put a further drag on growth in 2008.”

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Jim Rogers Says U.S. to Have Worst Recession `in a While’
http://www.bloomberg.com/apps/..sid=ayq29JCsf65c&refer=home