The agency charged with identifying the start of recessions made it official this week, declaring that the U.S. economy had slipped into recession one year ago. The government also reported that U.S. factory production fell to its lowest level in 26 years, and more than 181,000 people lost their jobs in November. The bad news sent the stock market into another nose dive, plummeting 680 points, or 7.7 percent, in a single day. The Dow gained back some ground during the week, but the dark pessimism remained.
The National Bureau of Economic Research’s designation of a recession carries weight because it is based on a broad assessment of the economy. While some experts define a recession as two consecutive quarterly declines in output, the bureau also tracks employment, incomes, and manufacturing. Most economists now believe this recession will last much longer than the postwar average of 11 months. “This downturn promises to be the worst since the Great Depression in the 1930s,” said Joseph Shapiro of investment firm MFR Inc.
Usually by the time the bureau gets around to pinpointing a recession, it’s already over, said Susan Tompor in the Detroit Free Press. If only that were true this time. By all indications, layoffs are likely to accelerate in the next four months “on top of the 1.2 million jobs already lost this year,” and the economy could very well shrink by 4 percent or more. Sad to say, the worst may be yet to come.
At least it’s no longer possible to avoid using “the R-word,” said the Seattle Post-Intelligencer in an editorial. That’s for the best, because citizens and leaders alike will now be forced to acknowledge the dire state of affairs without resorting to euphemisms. Now our leaders must do whatever they can to lessen the pain and to make sure that Wall Street will never again ride roughshod over a derelict regulatory system.
This notion that the solution rests in tougher government regulation is a fallacy, said Kevin Hassett in National Review. New data shows that countries with the lightest financial oversight, including the U.S., Canada, and Great Britain, are faring better in the global meltdown than their more heavy-handed counterparts. In other words, “countries that are economically free have suffered less than countries that are not.”