WASHINGTON – Most Americans sorely knew it already but now it’s official: The country is in a recession, and it’s getting worse. Wall Street convulsed at the news – and a fresh batch of bad economic reports – tanking nearly 680 points.
With the economic pain likely to stretch well into 2009, Federal Reserve Chairman Ben Bernanke said Monday he stands ready to lower interest rates yet again and to explore other rescue or revival measures.
Rushing in reinforcements Treasury Secretary Henry Paulson, who along with Bernanke has been leading the government’s efforts to stem the worst financial crisis since the1930s, pledged to take all the steps he can in waning days of the Bush administration to provide relief. Specifically, Paulson is eyeing more ways to tap into a $700 billion financial bailout pool.
On Capitol Hill, House Speaker Nancy Pelosi, D-Calif., vowed to have a massive economic stimulus package ready on Inauguration Day for President-elect Barack Obama’s signature.
That measure – which could total $500 billion – would bankroll big public works projects to generate jobs, provide aid to states to help with Medicaid costs and provide money toward renewable energy development.
Crafting such a colossal recovery package would mark a Herculean feat: Congress convenes Jan. 6, giving lawmakers just two weeks to complete their work if it is to be signed on Jan 20.
President George W. Bush, in an interview with ABC’s “World News,” expressed remorse about lost jobs, cracked nest eggs and other damage wrought by financial crisis. “I’m sorry it’s happening, of course,” said Bush. The president said he’d back more government intervention.
None of the pledges for more action could comfort Wall Street investors. The Dow Jones industrials plunged 679.95 points, or 7.70 percent, to close at 8,149.09
It was another white-knuckle day, punctured by grim economic reports. An index of manufacturing activity sank to a reading of 36.2 in November, a 26-year low, the institute for Supply Management reported. Construction spending fell by a larger than expected 1.2 percent in October, the Commerce Department said.
Adding to the gloom, the National Bureau of Economic Research, a group of academic economists, concluded Monday that the country has been suffering through a recession since December 2007.
Wither NBER’s decision, the United States has fallen into two recessions during Bush’s eight years in office. The first one stated March 2001 and ended that November
The economy jolted into reverse in the final three months of last year, After a short spring rebound, it contracted again in the summer. Economists say it is still shrinking and will continue to do so through at least the first quarter of next year.
Unlike past recessions, consumers are bearing the brunt of this one. Clobbered by job losses, hard-to-get credit and hits to their wealth from sinking home values and plunging portfolio investments consumers have cut back sharply on their spending, throwing the economy into chaos.
Watching customers’ appetites wane, employers have throttled back on hiring. The unemployment rate in October zoomed to 6.5 percent, a 14 year high. So far this year, 1.2 million positions have disappeared. The jobless rate is likely to climb to 8 percent or higher next year.
Against that backdrop, many economists believe the current recessions will be the worst since the 1981-82 downturn.
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