The Wall Street Journal, New York Times, and Financial Times all go big with news that the economy expanded—barely—in the first quarter, but most signs point to recession.

Gross domestic product rose at a slightly higher than expected annual pace of just 0.6 percent in the quarter, as it did in the fourth quarter. But companies built up their inventories in the first three months of this year&,dash;a potentially ominous sign of coming layoffs— and without that activity, along with a 5.5 percent surge in exports tied to the weak dollar, the economy actually contracted by 0.4 percent, the Journal says on A13 and in its A1 Business & Finance column. It was the lowest six months of growth since the 2001 recession, Bloomberg says. The FT emphasizes that real sales fell, and the NYT says that was for the first time since the 1991 recession.

The papers all note that the numbers evidence a beaten-down consumer, and that’s the NYT’s angle for its page one story. Consumer spending, which accounts for two-thirds of the economy, grew at an anemic annual rate of 1 percent in the first quarter, down from an average 3 percent the last two years. But even that growth masked a cutback in non-essential purchases.

As real estate prices plunge, so does the ability of homeowners to borrow against the value of their homes, crimping a major artery of spending. As banks grow tighter with their dollars in a period of uncertainty, families are running up against credit limits, forcing many to live within their incomes. And as companies lay off employees and cut working hours, paychecks are effectively shrinking.

“This is not a fluke or a technical quirk,” said John E. Silvia, chief economist at Wachovia in Charlotte, N.C. “It’s fundamental. Real disposable income has been squeezed.”

Indeed, the NYT reports that real wages fell 0.6 percent from a year earlier. The WSJ says wages and salaries grew 0.8 percent, but that appears to be before inflation.

The second quarter is likely to be much worse. The Journal says Morgan Stanley predicts GDP will fall 2 percent in the second quarter, though it reports that some say the federal government’s tax handout, which began appearing in checking accounts on Monday, will ease the pain. The Journal notes that a recession is whatever the National Bureau of Economic Research says it is, not—as is widely believed—an automatic formula of two consecutive negative-growth quarters.

Bloomberg:

“Some of the forces dragging the economy down are just beginning to come into play,” Nobel economics laureate Joseph Stiglitz said today in an interview. Banking executives who say the worst of the credit rout is over may be too optimistic, he said.

Honestly, folks, this is the last one

The papers all go big with the Federal Reserve, as expected, cutting interest rates by a quarter of a point to 2 percent, but saying (really it was Fedspeak “signaling”) it would likely pause from its aggressive money-easing for a while. The Journal leads its front page with the news, and endorses the policy, saying “the relative calm in recent weeks in financial markets suggested the timing was right.”

The Journal notes that the “Fed has been burned before,” like in October, when it said it would stop cutting rates.

The FT also leads page one with the rate cut, and says:

But the overall tone of the statement was more doveish than many in the market expected, with a gloomy assessment of economic conditions and an implicit bias towards growth risks. This raises the possibility that the US central bank could still end up cutting rates further, if not in June then later in the year.

The central bank is worried that further cuts could further boost inflation. Treasury Secretary Paulson told Bloomberg TV he thinks the credit crisis is more than half over. The FT says the Bank of England agrees and says markets are overestimating how bad losses will be.

The WSJ, in a C1 Heard on the Street column, disagrees, saying the latest wave of capital infusions by big banks shows the credit crisis isn’t over. It says the 10 percent increase in bank share prices over the last six weeks may be a “just another head-fake.”

This rally ignores what are likely to be mounting credit losses for both consumer and commercial loans because of the weakening economy and the continuing housing crisis. That means any assumption of a return to normal profit levels is about three years too early, according to a report earlier this week by Morgan Stanley analyst Betsy Graseck.

The Rent-A-Center racket

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.