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

Good work by the WSJ in a report on A4 that Rent-A-Center, which it calls a “rising power in the payday-loan industry,” put the squeeze on food banks who lobbied for caps on the rapacious interest rates the racket charges.

The paper says Rent-A-Center execs threatened to quit giving the $500,000 it has pledged to the charities unless they quit their lobbying efforts in Ohio, which yesterday passed a law limiting payday loans to 28 percent annualized interest and four loans of $500 per borrower per year.

The Journal dryly notes in the next sentence that “Rent-A-Center currently charges interest rates on one-week payday loans that are equivalent to an annual rate of as much as 782%, according to a company Web site.”

Rent-A-Center’s efforts worked. The food banks backed down.

Newsday plot thickens

The Journal scooped online yesterday (and puts on B1 today) that Cablevision will bid as much as $650 million for Newsday, raising the stakes in the battle over the paper, which Tribune Company agreed in principle to sell to Rupert Murdoch’s News Corporation last week. As Sam Zell has said, people sure want to pay him a lot of money for a piece of this dying industry.

The paper notes that Cablevision would face fewer regulatory hurdles than would Murdoch or the other bidder, New York Daily News owner Mort Zuckerman, who equaled the $580 million Rupe bid on Friday. But the WSJ says it might face problems with the company’s own shareholders.

The Journal says it isn’t clear whether Cablevision was proceeding with New York Observer owner Jared Kushner in a joint offer, but Newsday and the NYT say it is not.

The Times says the company “may be working with a partner” but its sources wouldn’t identify who it might be.

Thanks, but no thanks

The Los Angeles Times says a lot of banks and investors are willing to cut the terms and payments for borrowers under water on their mortgages, but our Quote of the Day shows how bad the housing bust really is—prices have fallen so far and people are in so much trouble that they just don’t care:

“We are working with borrowers to keep them in their homes, but a lot of them really don’t want to stay,” said Babette Heimbuch, chairwoman of FirstFed Financial Corp. of Los Angeles, a savings and loan operator that specialized in adjustable-rate mortgages, including many that were made without full documentation of borrowers’ incomes.

FirstFed says up to half of delinquent homeowners don’t even respond to requests to work out their notes.

Investors… are buying loans on the cheap from lenders who want them off their books. By paying less than face value for the mortgages, the new holders can modify loan terms, including shrinking the amount owed, and still make money.

With some economists projecting 2 million foreclosures this year, legislators and regulators are hoping to encourage wide use of this model. They want lenders and investors in mortgage bonds to mark down what borrowers owe and then provide them with lower-cost loans.

Calpers beware

The Journal on C1 looks at a blown land deal by Calpers, the California pension fund, which invested a billion dollars in property and now may lose “much of its investment.” The paper notes that the deal is going bad just as two Calpers execs are jumping ship, but says the moves “don’t appear to be related.”

The venture is structured similar to dozens of deals that were popular ways for builders like Lennar to buy highly leveraged land during the boom years and reduce the risk of owning the land outright. They would buy the land with partners in off-balance-sheet entities that would borrow money while limiting the builders’ exposure to the debt. Many of these deals are unraveling.

KKR goes green, sort of

The NYT puts on C1 a PR feed that KKR is partnering with the Environmental Defense Fund to go green. It’s notable because the company owns businesses with $185 billion in revenues and more than 800,000 employees. One of the notable businesses that could use greening is TXU, the big Texas utility company that KKR agreed to buy and reduce its carbon emissions.

The story seems overplayed to us, as the Times says the deal is “aimed at creating measurement tools of environmental performance across several areas.” The Journal has better news judgment, putting it at the bottom of a C3 story (to be fair, it also looks to be a PR exclusive) on a big venture capital fund raising half a billion bucks to target “larger clean-technology companies that need bigger sums of money to get to market.”

Preying on the elderly

The Houston Chronicle reports that the Texas securities commission has received more than 200 complaints from investors who said they were misled into investing into the now-frozen auction-rate securities markets, which they were told were similar to cash.

While some investors are wealthy… many are elderly people whose retirement funds are now frozen in auction rate securities.

“That’s the sad thing. They’re not wealthy people,” attorney Dana Kirk of Houston said. “It was their nest egg kind of money.”

Banks and the rest of the financial industry are going to have big-time problems with lawsuits over the next couple of years, and that’s something about which we haven’t seen enough reporting.

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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.