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Recession Talk on the Rise

Written By Brian Hicks

Posted January 3, 2008



Oil took the headlines yesterday, but was a dreadful manufacturing report that really pummeled the markets.

Manufacturing in the U.S. unexpectedly shrank the most in almost five years, reinforcing speculation that the Federal Reserve will cut interest rates again to stave off a recession.

The Institute for Supply Management’s manufacturing index dropped to 47.7, the lowest reading since April 2003, from 50.8 the prior month, the Tempe, Arizona-based group said yesterday.

Fifty is the dividing line between contraction and expansion.

Of course, contraction equals a recession , which many-besides me- now think is real possibility.

From MSNBC by John W. Schoen entitled: Economists say odds of a recession are rising.

"After six years of uninterrupted growth, the outlook for the U.S. economy in 2008 has darkened considerably in just the past month. While many economists say it’s too soon to know whether a recession is coming, forecasters say the latest economic figures don’t look promising.

"Obviously, the recession risk is rising sharply," said David Wyss, chief economist at Standard & Poors. "We’re getting to near even odds for recession in the first half of the year."

Given the rapid pace of slowing since the sizzling 4.9 percent annual growth rate logged in last year’s third quarter, there is some speculation that the economy may already be slipping into a period of negative growth. Given the lag in the collection and analysis of economic data, it’s not unusual for a recession to be underway before statistics confirm it.

"If there’s going to be a recession, it’s entirely possible that we are in it – or just beginning it now," said Nigel Gault, an economist at Global Insight. "We won’t know for a while. In two or three months, looking back from there to the December, January, February numbers, I think it will be evident by then whether or not we’ve entered a recession."

That makes tomorrow’s job report another important indicator to keep an eye on.

According to the latest Reuters poll, the Labor Department is expected on Friday to report that nonfarm payrolls grew by 70,000 in December, down from 94,000 the prior month.