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    03-15-08 Boston Globe-Recession Is Here, Economist Declares

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    Mark Welkie
    Martin Feldstein, president of the National Bureau of Economic Research, declared that the United States has entered a recession that could be the worst since World War II. Feldstein cited sinking housing prices, job losses, and turmoil in financial markets as the causes. The National Bureau is the official arbiter of recessions but won't make a determination for months. Most economists define a recession as two consecutive quarters of economic contraction. Feldstein's remarks came as alarming economic developments increased, including surging oil prices, new home foreclosure worries, and the near collapse of investment bank Bear Stearns which received an emergency bailout loan.

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    03-15-08 Boston Globe-Recession Is Here, Economist Declares

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    Mark Welkie
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    Martin Feldstein, president of the National Bureau of Economic Research, declared that the United States has entered a recession that could be the worst since World War II. Feldstein cited sinking housing prices, job losses, and turmoil in financial markets as the causes. The National Bureau is the official arbiter of recessions but won't make a determination for months. Most economists define a recession as two consecutive quarters of economic contraction. Feldstein's remarks came as alarming economic developments increased, including surging oil prices, new home foreclosure worries, and the near collapse of investment bank Bear Stearns which received an emergency bailout loan.

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    03-15-08 Boston Globe-Recession is Here, Economist Declares

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    Martin Feldstein, president of the National Bureau of Economic Research, declared that the United States has entered a recession that could be the worst since World War II. Feldstein cited sinking housing prices, job losses, and turmoil in financial markets as the causes. The National Bureau is the official arbiter of recessions but won't make a determination for months. Most economists define a recession as two consecutive quarters of economic contraction. Feldstein's remarks came as alarming economic developments increased, including surging oil prices, new home foreclosure worries, and the near collapse of investment bank Bear Stearns which received an emergency bailout loan.

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    22 views2 pages

    03-15-08 Boston Globe-Recession Is Here, Economist Declares

    Uploaded by

    Mark Welkie
    Martin Feldstein, president of the National Bureau of Economic Research, declared that the United States has entered a recession that could be the worst since World War II. Feldstein cited sinking housing prices, job losses, and turmoil in financial markets as the causes. The National Bureau is the official arbiter of recessions but won't make a determination for months. Most economists define a recession as two consecutive quarters of economic contraction. Feldstein's remarks came as alarming economic developments increased, including surging oil prices, new home foreclosure worries, and the near collapse of investment bank Bear Stearns which received an emergency bailout loan.

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    of 2

    53407450.

    doc Page 1 of 2

    March 15, 2008

    Recession is here, economist declares


    Feldstein heads key forecasting group Slump may be worst since World
    War II
    By Todd Wallack, Globe Staff

    The United States has already slipped into a deep recession that could be the most
    serious since World War II, said Martin Feldstein, president of the Cambridge group
    that is considered the official word on economic cycles.
    "The situation is bad, it's getting worse, and the risks are that the situation could be
    very bad," Feldstein said in a speech yesterday at a financial industry conference in
    Boca Raton, Fla.
    JPMorgan and the Federal Reserve rescue Bear Stearns. B5.
    Feldstein, president of the National Bureau of Economic Research and a professor of
    economics at Harvard University, said the chief causes of the shrinking economy are
    sinking housing prices, months of job losses, and turmoil in the financial markets.
    The National Bureau of Economic Research is the official arbiter of when recessions
    begin, and it could still be months before the organization makes that determination.
    If it does, that would mark a formal end of six years of economic expansion.
    Economists generally define a recession as two consecutive quarters of economic
    contraction, something that can only be measured after the fact. The US economy
    grew at a scant 0.6 percent rate in the 2007 fourth quarter.
    Also yesterday, Macroeconomic Advisers, a St. Louis consulting firm run by several
    former Federal Reserve officials, said the US economy barely grew in January and
    predicted it declined by 0.7 percent in February.
    Feldstein's remarks were punctuated by an extraordinary run of alarming
    developments yesterday, including surging oil prices, new worries about home
    foreclosures, and the near collapse of a venerable investment bank that sparked
    another rout in stock prices on Wall Street.
    US investment giant Bear Stearns Cos. yesterday morning received an emergency
    bailout loan for an undisclosed amount that was facilitated by the Federal Reserve
    Bank, which invoked a little used Depression-era measure to unleash the funds. Bear
    Stearns is in dire need of cash after it was forced to write off billions of dollars of
    losses in mortgage-related investments, and worried investors withdrew their funds.
    Bear Stearns's stock lost $3.2 billion of value yesterday, almost half its market
    capitalization. The major stock indexes all posted steep declines, with the Dow Jones
    industrial average down 195 points to close below 12,000.
    US oil prices, meanwhile, remained above $110 a barrel, after hitting a record $111
    on Thursday, putting increasing strain on consumers and businesses alike. United
    Airlines and Continental Airlines raised round-trip fares by as much as $50 a ticket to
    help recoup the cost of rising jet fuel prices, the latest in a wave of ticket increases
    throughout the industry. Heating oil and gasoline prices also surged.
    53407450.doc Page 2 of 2

    Rising oil prices, in turn, are driving up prices for everything from food to electricity,
    threatening to end years of modest inflation. Gold prices hit a fresh record yesterday,
    as investors embrace it as a hedge against inflation and a weakening US dollar,
    which remained at lows against the euro.
    Earlier this month the US Labor Department reported that private employers slashed
    their payrolls by 101,000 jobs in February, the third straight month of job reductions.
    Also yesterday a widely followed monthly index of consumer sentiment posted a 16-
    year low.
    In Massachusetts, economists said there are signs the local economy is weakening,
    but the state still reported a modest increase in jobs in January, better than the
    nation as a whole. The February unemployment numbers are slated to be released
    next week.
    "We know the national economy is slowing, but the state's economy seems to be
    stronger because of our tech sector," said economist Alan Clayton-Matthews, a
    professor at the University of Massachusetts at Boston.
    But like much of the rest of the country, Massachusetts has been hurt by falling home
    prices and rising foreclosures, triggered by risky loans to buyers who bought homes
    they ultimately could not afford.
    Feldstein followed his remarks in Florida with an emphatic statement later in the day.
    "The economy is now in a recession," he said. "It will last longer and be deeper than
    the last two recessions, which lasted only 8 months from peak to trough. It could well
    be longer and deeper than the recession in the early 1980s that lasted 16 months."
    Feldstein's view is increasingly the common one among economists. A Wall Street
    Journal survey of economists published yesterday found more than 70 percent
    agreed that the US economy is now in recession.
    Mark Zandi, chief economist for Moodys.com, said current economic and sales data
    overwhelmingly bolster the argument for recession. He further noted that Feldstein
    was prescient in predicting last year the US economy was due for a rough patch.
    "Dr. Feldstein was well ahead of most economists in diagnosing the current problems
    and suggesting it would result in recession," Zandi said.
    Todd Wallack can be reached at [email protected]. Material from Globe wire
    services was used in this report

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