Merrill: Recession Is Already Here

Telegraph:

The US has entered its first full-blown economic recession in 16 years, according to investment bank Merrill Lynch (MER).

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 instant panicked reaction was to try 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 channeling Nouriel Roubini" in "one of the most bearish speeches by a sitting finance minister I have ever read."

Food for thought: Regardless of your politics, one must be amazed at 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?

Sources:
US recession is already here, warns Merrill
James Quinn
Telegraph, 12:05am GMT 08/01/2008
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/01/07/bcnuseco107.xml

Bush to Meet Advisers as Stimulus Package Considered
Roger Runningen and Holly Rosenkrantz
Bloomberg, Jan. 3 2008
http://www.bloomberg.com/apps/news?pid=email_en&refer=&sid=aX7rP826NCTc

Paulson's Most Bearish Speech Ever
MARKET MOVERS
Portfolio.com, Jan 7 2008 5:13pm EST
http://www.portfolio.com/views/blogs/market-movers/2008/01/07/paulsons-most-bearish-speech-ever

Comments

[Roger Enright:]

Someone should tell Steve Liesman.

2008 Jan 08 10:04 AM

[Dean M:]

That is a fascinating graph, 50 years of data is hard to argue with.

2008 Jan 09 01:56 AM

[flyoverman:]

Am I missing something? I read that the graph title says there is 100% correlation between the increase in the unemployment rate and the onset of a recession. When I actually look at the graph, I see that in various years, including 1956, 1963 and 1984/5, as well as a few other cases, that, yes, a 100% recession followed the spikes, but sometimes as much as 6 years later. What I a missing? Please correct me if I'm misreading this, but the titling of this graph is "hogwash." Timing is everything, per John Maynard Keynes, "In the long run we are all dead." Anyone can predict the market will go up and be eventually right, the same for anyone who predicts there will be a recession. Without pertinent timeframes, this kind of information is useless. Please correct me if I misunderstand. People who put out and use this kind of headline information lose credibility with me.

2008 Jan 09 10:48 AM

[flyoverman:]

I also find these executives like the folks at Merrill Lynch incredulous. Per the referenced article.
"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."
Very quick to pass the blame... woe is me, it's the economy's fault. No Mr. Rosenberg, Merrill's woes are your and your other Merrill Lynch executive friends fault. You guys need to take personally feel the pain for your investing/lending decisions. At least Japanese executives are sincere and adult-like in their responsibility ownership.

2008 Jan 09 12:24 PM

[Sr. Pessimist:]

"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.- Just try and rob the poor to give to the rich again, Bush. Not only have you followed your goon bosses' orders to rob whatever we had, you also dropped effective wages for labor to less than it takes to support ourselves. No more Republican tax stimuli, please. Just cut the crap and declare the US over with. Split up the states and then I won't have to pay for inbred Bammers to smoke crank.

2008 Jan 10 01:04 AM

[fodi MD.:]

The real debate is will we see stagflation or depression. Inflationary recession is your normal financial enviornment now,not are we going to see a recession!

2008 Jan 10 03:35 AM

[Pay Day:]

American people are currently being hit by recession. Even workers from other places are affected by it that is why President-elect Barack Obama is doing the best way he can to help the consumers and workers out of this trouble. His plan of cutting taxes to consumers would benefit not only the workers and consumers but also the businesses. He's trying to get out a tax cut and a tax credit called the Make Work Pay credit. The future is impossible to tell - but it seems that the measures enacted by the current administration aren't helping and the need for a payday loan is increasing. The mortgage collapse and subsequent credit crunch have slowed the economy to an almost stand still. However, economic measures usually take some time to start working, but it doesn't take the sting out, in the meantime. Obama is hoping that bigger checks on payday will restore consumer confidence and you won't need to take out a payday loan just to get by.

Jan 10 01:48 AM