Group: Recession Began In Dec. 2007

The National Bureau of Economic Research says the United States has officially been in a recession since December 2007. A recession is sometimes defined as two consecutive quarters of negative growth, but the private group uses a more precise measure.

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ROBERT SIEGEL, host:

From NPR News, this is All Things Considered. I'm Robert Siegel. And we begin this hour of our program with one of those news flashes that may not come as news to most of you. The country is in a recession. In fact, we've been in a recession since December of last year.

Today, the private research group that decides these things made it official. And as if to mark the news with an exclamation point, the stock market plummeted. The Dow was down nearly 700 points. NPR's Jim Zarroli has our story.

JIM ZARROLI: The National Bureau of Economic Research is famous for one thing and one thing alone. It's considered by most economists to be the official arbiter of when recessions begin. It usually takes months for the bureau to pour through all the data it looks at, and it often doesn't make its pronouncements until months after a recession has begun. Today, it finally made the call, saying the recession got under way a year ago. MIT professor James Poterba is the bureau's president.

Dr. JAMES POTERBA (Department of Economics, Massachusetts Institute of Technology; President, National Bureau of Economic Research): It's been a really remarkable and quite difficult economic time in the last five or six months, and we've seen things happening in the U.S. economy and the credit sector and the financial sector and the housing market that are of extraordinary proportion.

ZARROLI: Poterba said the call this time around was a complicated one. During the first half of 2008, the U.S. economy was actually growing slightly, at least according to the Commerce Department.

And though that would seem to rule out a recession, the bureau ultimately decided that other factors made one more likely. Incomes were falling, and the labor market was shrinking. Payroll numbers peaked last December and have been falling steadily ever since. Peter Morici is an economist at the University of Maryland.

Dr. PETER MORICI (Department of Economics, University of Maryland): We've lost over a million jobs since last December. We're likely to lose another - almost 300,000 in November. Yes, we're in a recession.

ZARROLI: Morici says the bureau's pronouncement isn't really a surprise.

Dr. MORICI: Most of us have been saying we've been in a recession for at least six months now. We've seen it in the employment data. We've known that the economy is going to contract. We've seen it in the lending data of banks. All the indicators are down. If we're not in a recession, then the sun isn't rising tomorrow.

ZARROLI: Treasury Secretary Henry Paulson echoed that sentiment today, saying the pronouncement of a recession isn't likely to be big news to most Americans, but it does make it official.

The bureau doesn't try to asses how severe the recession is or speculate about how long it's likely to last, but plenty of other economists are doing that. Today, none other than Federal Reserve Chairman Ben Bernanke gave a downbeat report about where the economy is going. In a speech in Texas, Bernanke said things have only gotten worse in recent months.

Mr. BEN BERNANKE (Chairman, Federal Reserve): The U.S. economy remains under considerable stress. Economic activity was weakening even before the intensification of the financial crisis this fall. The sharp falloff and consumer spending during the summer was particularly striking.

ZARROLI: Bernanke said those factors are likely to weigh on the economy in the months to come. In the hours after Bernanke's speech, the stock market took another steep plunge. The Standard & Poor's 500 index lost nearly nice percent of its value, and the other major stock indexes were down as well. It was a huge drop even by recent standards, and it wipes out much of the gains that the market has enjoyed in recent weeks. Jim Zarroli, NPR News, New York.

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Dow Plunges 680 Points; Recession Is Official

U.S. stocks plummeted nearly 700 points on Monday amid increased concerns about the slumping global economy.

The Dow Jones industrial average was down 679.95 points, or 7.7 percent, to end unofficially at 8,149.09, based on the latest data. The Standard & Poor's 500 index was down 80.05 points, or 8.93 percent, to finish unofficially at 816.19. The Nasdaq composite index was down 137.50 points, or 8.95 percent, to close unofficially at 1,398.07.

Financial services companies and retailers were among Wall Street's biggest losers, with Wal-Mart, Macy's, Sears, Citigroup and Bank of America sliding.

Earlier Monday, the National Bureau of Economic Research said the United States has been in a recession since December 2007. The news capped another day of gloomy economic news that sent stocks lower.

Federal Reserve Chairman Ben Bernanke said Monday that the U.S. economy is likely to remain weak for some time, and that policymakers must react decisively to stimulate the economy and end the recession that has gripped the United States for the past year.

Another report released Monday showed that factory activity in November fell to its lowest level since the 1981-82 recession, and there was also a steep drop in homebuilding.

Speaking in Austin, Texas, Bernanke said further interest rate cuts beneath the Federal Reserve's current target of 1 percent for its benchmark overnight funds rate were feasible, but the Fed also will use other unconventional measures to aid growth.

"Although conventional interest rate policy is constrained by the fact that nominal interest rates cannot fall below zero, the second arrow in the Federal Reserve's quiver — the provision of liquidity — remains effective," he said.

Bernanke said the Fed could directly purchase longer-term securities issued by the U.S. Treasury or government-sponsored agencies in order to influence yields and stimulate demand.

U.S. Treasury prices rose sharply on his remarks, pushing yields to their lowest in five decades.

Meanwhile, Treasury Secretary Henry Paulson said the administration is looking for more ways to tap a $700 billion financial rescue program and will consult with Congress and the incoming Obama administration.

Paulson said the program has distributed $150 billion out of the $250 billion earmarked to buy stock in banks as a way to boost their resources so they can lend more.

He said the administration is looking at other ways to utilize the rescue package, including alternatives for providing capital to financial institutions.

U.S. manufacturing, meanwhile, shrank at its fastest pace since June 1980, according to a report released Monday by the Institute for Supply Management, a Tempe, Ariz.-based trade group of purchasing executives.

A 50 on the institute's Purchasing Manager Index is the dividing line between expansion and contraction in the manufacturing sector. November's figure was just 36.2, down 2.7 percentage points from October. It was the fourth consecutive monthly drop.

New orders were also down for the 12th straight month in a sign that the downward trend is unlikely to turn around anytime soon.

A similar picture is emerging in Europe, where factories across the continent put in their worst performance in November since private survey records began more than a decade ago. Manufacturing also tumbled in China in November.

New Commerce Department data also show that construction spending fell 1.2 percent in October following an unchanged reading the previous month as home construction posted its biggest drop in three months.

From NPR and wire reports

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