The US has entered its first full-blown economic recession in 16 years, according to investment bank Merrill Lynch.
Merrill, itself one of Wall Street’s biggest casualties of the sub-prime crisis, is the first major bank to declare that a recession in the world’s biggest economy is now underway.
US Treasury Secretary Hank Paulson has admitted that the US economy faces severe challenges David Rosenberg, the bank’s chief North American economist, argues that a weakening employment picture and declining retail sales signal the economy has tipped into its first month of recession.
Mr Rosenberg, who is well-respected on Wall Street, argues: "According to our analysis, this [recession] isn’t even a forecast any more but is a present day reality."
That’s a slight overstatement. What I believe Rosenberg is saying is that, based upon the unemployment data, a recession is now unavoidable.
In a related note, Bill King reminds us that the President and Fed Chair get the Employment Report at 17:00 (5pm EST) on the day before the report is released. This means that Bush called the meeting minutes after seeing the report.
24 minutes later, Bloomberg carried this story:
"President George W. Bush will meet with Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke tomorrow as he considers whether to announce a new economic stimulus package amid slowing growth. Bush will speak to reporters tomorrow after a 1 p.m. meeting at the White House with members of the President’s Working Group on Financial Markets, press secretary Dana Perino said today.
The quick and somewhat panicked reaction was an attempt to get ahead of the story, but events moved too fast; Markets did not respond positively.
Also of note: Portfolio’s Felix Salmon notes that Treasury Secretary Hank Paulson "seems to be channelling Nouriel Roubini" in "one of the most bearish speeches by a sitting finance minister I have ever read."
Oh, and Paulson will be guest-hosting CNBC’s Squawk Box this morning.
Food for thought: Regardless of your politics, one must be amazed at all the professional reputations that have taken a toll by serving in this White House. Has anyone escaped this administration with their reputation intact?
I wonder: Is Hank Paulson now trying to salvage his increasingly damaged reputation?
US recession is already here, warns Merrill
Telegraph, 12:05am GMT 08/01/2008
Bush to Meet Advisers as Stimulus Package Considered
Roger Runningen and Holly Rosenkrantz
Bloomberg, Jan. 3 2008
Paulson’s Most Bearish Speech Ever
Portfolio.com, Jan 7 2008 5:13pm EST
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