Lehman Brothers: “economy has formally slipped into a recession”

According to Australia’s Sydney Morning Herald, in the United States:

Payrolls fell by 78,000 in April, based on the median forecast in a Bloomberg News survey before the Labor Department’s May 2 report. Figures two days earlier may show the economy expanded at a 0.4% annual pace from January through March, the smallest gain in five years.

”Despite our forecast for positive growth in the first quarter, we believe the economy has formally slipped into a recession,” said Ethan Harris, chief US economist at Lehman Brothers in New York. ”Given the headwinds from the housing and credit markets, we expect spending to remain weak through the end of 2009.” Harris projects a 0.7% growth rate for the first three months of the year.

Economists forecast spending rose last quarter at the slowest pace in 13 years as the loss of jobs, increase in food and energy costs, and drop in property values hurt confidence. The Federal Reserve may lower the benchmark interest rate by a quarter-point to try to stem further erosion in the growth. . . .

”The employment report will clearly show the economy is in recession,” said James O’Sullivan, a senior economist at UBS Securities in Stamford, Connecticut. While a positive reading on first-quarter growth will stoke debate, ”ultimately, what will determine whether we’re in a recession or not is payrolls,” O’Sullivan said. . . .

”Contrary to popular opinion, the incoming data are, on net, getting worse, not better,” Merrill’s Chief North American Economist David Rosenberg said in an April 24 note to clients. . . .

Investors have been increasing bets in recent weeks that policy makers will pause after this week’s cut, according to Bloomberg data, as concerns over inflation mount.

Author: benfell

David Benfell holds a Ph.D. in Human Science from Saybrook University. He earned a M.A. in Speech Communication from CSU East Bay in 2009 and has studied at California Institute of Integral Studies. He is an anarchist, a vegetarian ecofeminist, a naturist, and a Taoist.

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