Feb. 8 (Bloomberg) -- A U.S. recession is now an even bet as job losses and the housing contraction jeopardize the longest- ever expansion in consumer spending, according to a Bloomberg News survey.
``We're seeing a real squeeze on the consumer,'' said Kurt Karl, chief U.S. economist at Swiss Re in New York, the world's largest reinsurer. ``We're in, or on the brink of, a recession. The Fed will keep cutting rates to help it be a short and shallow one.''
Consumer spending, which accounts for more than two-thirds of the economy, will grow at a 1 percent annual rate from January through March, half the previous quarter's gain and the smallest since 2001. The last time spending dropped was in 1991.
`Cusp of a Recession'
``We're on the cusp of a recession,'' said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut. ``Support from the labor market is starting to erode. The consumer is definitely in for a period of weakness.''
The economy lost 17,000 jobs in January, the first drop in more than four years. The unemployment rate will gradually rise to 5.2 percent by the second quarter of 2008, according to the survey median, from last month's 4.9 percent.
`Drying Up'
``If the job market is drying up, which seems to be the case, consumers have nothing going for them,'' said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York.
``It is a difficult retail environment out there, and I expect it will be going forward,'' Terry Lundgren, chief executive officer of Macy's Inc., the second-biggest U.S. department-store chain, said this week. The retailer cut its fourth-quarter profit forecast and said it will eliminate 2,300 jobs.
Worsening Housing Scene
Meanwhile, the housing industry is bracing for even worse times ahead. The National Association of Realtors yesterday cut its 2008 forecast for sales of previously owned and new homes.
In a sign the slowdown is spreading beyond housing, service industries unexpectedly contracted in January at the fastest pace since the 2001 recession, a report from the Institute for Supply Management showed on Feb. 5. U.S. stocks tumbled the most in 11 months that day. The Standard & Poor's 500 Index is down for three consecutive months, the longest losing streak since 2003.
guys, think about it, the dot.com bubble ONLY accounted for 15% of our nations GDP and the stock market was hit hard with loses when the bubble finally burst in 2000. tech stocks have still not recovered in 8 yrs. Nasdaq in 2000 = 5,050, Nasdaq in 2008 = 2,293.
the current consumer bubble spurred on by incoherent lending practices in housing, accounts for 70% of our nations GDP.
15% vs 70% of GDP.
you do the math.
NT
