A private group says the U.S. economy has been in a recession since December of last year. The declaration is made by the National Bureau of Economic Research. The private NBER says its group of academic economists decided that the U.S. recession began last December. Many economists believe the current downturn will last through at least the middle of next year, and will be the most severe slump since the 1981-82 recession. By one benchmark, a recession occurs whenever the gross domestic product declines for two consecutive quarters. However, the NBER’s dating committee uses broader and more precise measures. Founded in 1920, the NBER has more than 1,000 university professors and researchers who act as bureau associates, studying how the economy works.
President George W. Bush is expressing remorse that the global financial crisis has cost jobs and damaged retirement accounts. The president told ABC’s “World News” in an interview that he will support additional federal intervention, if necessary, to ease the recession. The interview will air tonight. Bush told the network: “I’m sorry it’s happening, of course.”
An Associated Press review of regulatory documents finds that the Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed. The review shows the government buckling to pressure from some of the same banks that have now failed and ignoring warnings that foretold the financial meltdown. California mortgage lender Paris Welch wrote to U.S. regulators in January 2006 warning of foreclosures and other horror stories. She lost her job about a year later in the housing implosion. The aggressive lobbying by banks included assurances that the now troubled mortgages were okay. By the time new rules were released late in 2006, the toughest of the proposed provisions were gone. The administration belief in market forces and reluctance to intervene has, ironically, ushered in the most massive government intervention since the 1930s.
House Speaker Nancy Pelosi is promising Congress will try to have a huge economic recovery bill ready for President-elect Barack Obama as soon as he takes office. The California Democrat said that lawmakers will press ahead in hopes the huge bill will be ready for Obama’s signature when he takes office on January 20th. The measure could total $500 billion for infrastructure, aid to states with their Medicaid costs and renewable energy development. Congress convenes January 6th, which would give lawmakers just two weeks to complete the bill if it is to be signed right away.
Federal Reserve Chairman Ben Bernanke says further interest rate cuts are “certainly feasible.” But the financial leader warns there are limits to how much such action would revive an economy likely to stay weak well into next year. Bernanke’s comments, in prepared remarks to business leaders in Austin, says the Fed will continue to look for innovative ways to break through the credit logjams. The Fed’s key interest rate now stands at one per cent–a level seen only once before in the last half-century. Many economists predict Bernanke and his colleagues will drop the rate again at their next meeting on December 15th through 16th.
Treasury Secretary Henry Paulson says the administration is looking for more ways to tap the $700 billion financial rescue program and will consult with Congress and the incoming Obama administration. Paulson says 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 says the administration is looking at other ways to utilize the rescue package, including alternatives for providing capital to financial institutions.
The United Nations is recommending massive economic stimulus packages to deal with the fallout of a global downturn. A U.N. report–entitled the Global Outlook Report—predicts the U.S. dollar and world per capita income will decline further in 2009. It says export growth and capital inflows will fall and borrowing costs for developing countries will increase in 2009. The report was released in Qatar on the sidelines of a U.N. Development Conference. It says the world body recommends stronger regulation of financial institutions, an overhaul of the international reserve system and more inclusive global economic governance. Global outlook is part of U.N.’s assessment of the world economic situation in 2009.
A trade group says a measure of U.S. manufacturing activity fell to a 26-year low in November as new orders fell for the twelfth consecutive month. The reading of 36.2 from the Institute for Supply Management’s monthly survey of manufacturing activity is below October’s 38.9. It’s also worse than Wall Street economists’ expectations of 38.4 as measured by a survey by Thomson Reuters. A reading below 50 indicates the sector is contracting. The ISM says the November figure is the lowest since May 1982 when the economy was in the midst of a painful recession.
Construction spending fell by a larger-than-expected amount in October–an indication the problems facing developers in the form of a sinking economy and severe credit crisis are deepening and likely to persist. The Commerce Department says construction spending dropped by 1.2 per cent in October, much bigger than the 0.9 per cent decline that many analysts had expected. The weakness was led by another sizable drop in home construction, which has fallen every month but two over the past two and a half years. Nonresidential building also weakened as developers face tougher times getting financing because the banking system is going through a severe credit squeeze.
Online retailers hoped they had a deal for you on “Cyber Monday.” But their expectations have also been lowered on what’s considered the unofficial kickoff to the online retail season. Today marks the online retail industry’s ceremonial kickoff for the holiday shopping season. The National Retail Federation says more than 80 per cent of retailers had special promotions online today, up from last year.
It wasn’t a complete disaster as some feared, but Thanksgiving shopping weekend sales are looking like they only met the low end of expectations, at best. That’s thanks to tempered spending by consumers and unprecedented deep discounts. Now, the nation’s merchants are struggling to find other tricks to entice financially strapped shoppers. Industry analyst Marshal Cohen says the message from consumers is they want even better deals and they’re willing to wait for them. Cohen says he expects retailers will be doing more two-for-one deals. While the crowds did come out to buy, many analysts say they were thinner than last year, and according to some accounts, the pre-dawn buying binge fell off sharply during the rest of the weekend. Clearly economic woes played a key role in how shoppers bought this weekend. The managers of Dillard’s and Macy’s Greenspoint Mall in North Houston both said weekend crowds met expectations, though shoppers seemed to be more bargain-hungry than in recent years.
Chicken producer Pilgrim’s Pride is filing for Chapter 11 bankruptcy protection. Company spokesman Ray Atkinson says Pilgrim’s Pride is reorganizing and not liquidating its assets. He says the company will keep operating. The Pittsburg, Texas-based company sought the bankruptcy protection in a filing with the U.S. Bankruptcy Court for the Northern District of Texas. The company has been saddled by debt due to the acquisition of its rival Gold Kist, and has had to extend its temporary credit line three times since September. It’s also hurting due to volatile feed prices and an oversupply of meat on the market, which keeps prices down.
The head of the United Auto Workers is warning Congress not to let the Big Three go under. Ron Gettelfinger says the $25 billion they want would be a bridge loan, not a bailout. He says the nation “cannot afford to see these companies fail.” Getterfinger told CNN’s “Late Edition” that the UAW is willing to consider more concessions, as long as others share in the sacrifice. But he says he thinks they’re already competitive because of givebacks negotiated earlier. General Motors, Ford, and Chrysler are supposed to offer a recovery plan to Congress on Tuesday. Hearings are scheduled later in the week, and Congress may reconvene next week to consider a bailout if lawmakers like what they see. Members of Congress remain deeply divided on the aid.
STRONG>Ford says it is considering selling Volvo as the struggling U.S. automaker seeks to raise cash and weather the industry crisis. Ford said it expects its strategic review of the Swedish luxury automaker will take several months. The Swedish government has said it has been in talks with Volvo and with General Motors’ Saab unit following reports that the U.S. parent companies were seeking aid for their Swedish carmakers. Ford, GM and Chrysler will go before congress on Tuesday to present a proposal for $25 billion in loans to keep them afloat as sales sag.
Iranian state television is reporting that OPEC’s secretary-general says a daily oil production cut of between one million and 1.5 million barrels is likely in December. Secretary-General Abdullah el-Badri was quoted on the station’s Web site saying that the Organization of Petroleum Exporting Countries is facing a very difficult situation and plans to “restore oil prices to $90 per barrel.” OPEC’s next official meeting is in Algeria on December 17th. El-Badri is in Tehran for an energy conference. The bloc is grappling with how to reverse plunging prices, but ended a meeting in Cairo on Saturday without announcing a cut.
Officials say a joint petrochemicals venture between Dow Chemical and a Kuwaiti company will begin operations by January 1st. Midland-based Dow Chemical and Petrochemical Industries said they have signed the necessary documents to form K-Dow Petrochemicals. They say the total enterprise value of K-Dow is about $17.4 billion. Dow expects to receive $9 billion in pretax proceeds related to the transaction, including a $1.5 billion special cash distribution from K-Dow. K-Dow will make plastics for numerous uses, including consumer products, automotive parts and drug processing. It will be based in the Detroit area and is expected to announce a headquarters site by year’s end.
Federal health officials estimate that the struggling economy is likely to speed up by one to three years the exhaustion of the Medicare trust fund covering hospital and nursing home care. Trustees for the social security and Medicare programs warned last march that the trust fund for Medicare part a would become insolvent in 2019. But the chief actuary for Medicare said the economy will likely generate less revenue through payroll taxes than the trustees had projected. Once the trust fund is exhausted, the federal government will continue to pay for hospital care and other services, but it would only have enough money coming in to cover 78 per cent of estimated costs.
Massive infrastructure projects to help deliver energy independence are clashing with land ownership rights. In the past decade, more than 20,000 miles of new natural gas pipelines have been built and brought on line. The owners of property over which new pipelines are planned are concerned about leaks into water and soil, land damaged by construction, land lost to a right of way and, in some cases, loss of livelihood. Those concerns range from a midwestern horse farm to a family vineyard in Yamhill, Oregon. The behemoth of the new pipelines is the $4 billion Rockies Express. Construction began two years ago about 160 miles northwest of Denver. It is expected to reach Clarington, Ohio, by next summer. The bulk of the new natural gas supply is in the energy-rich Rockies and Texas. Producers are sinking traditional oil and gas wells and drilling into coal-bed methane reserves in Wyoming, Colorado and Utah. In Texas, it’s the 6,000-square-mile bedrock region of natural gas in North Texas called the Barnett Shale, along with the Bossier Sands tight-gas formation.
Eastern Kentucky University is planning a research center aimed at developing fuel from non-edible plants. The school in Richmond is joining up with California-based General Atomics to create a new center for renewable and alternative fuel technologies. General Atomics is known for producing the unmanned predator aircraft. Researchers at EKU will be studying ways to make fuel from cellulose-based materials, such as switchgrass or sorghum. Governor Steve Beshear said during a news conference that the state is planning to contribute about $1.5 million toward the project. It will also receive about $4 million in federal funding.