The business press piles on the economy this morning with The New York Times saying it faces a “Toxic Blend of Ailments”, The Wall Street Journal reporting 70 percent of its surveyed economists say it’s recession time, and the Financial Times and Bloomberg flatly saying (without hiding behind pesky sources) that the U.S. “is in recession.”
Which all makes sense, as a list of yesterday’s bad economic news shows: retail sales fell 0.6 percent in February, according to the government; jobless benefits rolls rose to a 2.5 year high; gold hit $1,000 an ounce while the dollar fell below 100 yen and oil hit $111, all for the first time; business inventories rose 0.8 percent.
Here’s the NYT on its Business Day cover:
Almost everything seems to be going wrong for the American economy at once. People are buying less, but most things are costing more. Mortgage rates are rising, the dollar is falling and prices of key commodities like oil are leaping from one record high to the next
A toxic blend of economic and financial developments is testing policy makers and lawmakers who are struggling to contain the slump brought on by the collapse of the mortgage market, a downturn that now looks sure to push the economy into a recession. Though current conditions are a far cry from the 1970s, resurgent inflation is raising the threat of stagflation—a condition in which unemployment and the price of goods and services both rise.
The WSJ quotes Wells Fargo’s senior economist saying you gotta be cuckoo to doubt a recession: “The evidence is now beyond a reasonable doubt.” The FT quotes a Goldman Sachs economist saying: “It appears the ‘hiring strike’ is still going on as employers are very hesitant to add to payrolls in a slowing overall economy.”
Bloomberg says traders are betting on “Helicopter Ben” Bernanke to drop yet another cash bath from the heavens, something that seems to be becoming a near-weekly event:
Traders increased bets on a three-quarter percentage-point interest-rate cut by the Federal Reserve when officials meet on March 18. After a 15 percent jump in oil prices and an 85,000 drop in U.S. payrolls so far this year, economists project the weakest pace of consumer spending since 1991 this quarter.
Meanwhile, credit continues to tighten, choking off possible sources of economic growth. Reuters reports mortgage rates rose this week. That’s despite the Fed’s move to take on junk collateral from struggling banks—something it intended to make it easier and cheaper for banks to extend credit. And margin calls for hedge funds continue to mount.
About half the economists in the WSJ’s survey expect this recession to be nastier than the last two downturns, which were relatively mild.
The Journal, in its C1 story on the record (non-inflation-adjusted) gold price has our Mad Max Quote of the Day:
Jon Nadler, a gold analyst with Kitco Bullion Dealers Montreal, which runs a gold-information Web site, defected from communist-controlled Romania in 1972 with gold coins sewn into his clothing. His stash allowed him to pay for his U.S. education.
But he said gold bugs who hoard gold to the exclusion of other assets, predicting prices will reach $4,000 or $5,000 an ounce, are missing the point. The financial system would have to break down for gold to rise to those levels. It would “mean complete ruin for everything you own,” he said, in which case “you’d better invest in lead, for bullets.”
The buckling buck
Bloomberg says the collapsing dollar has two of the big Wall Street banks expecting a global intervention to shore up the currency. It says such an effort would be the first in thirteen years.
The wire service notes that the European Central Bank and the Japanese finance ministry are griping about the weak dollar, which makes their countries’ exports more expensive in the U.S.
“The dollar’s fall will worry other markets, which are so fragile right now,” (Goldman Sachs Chief Economist Jim) O’Neill said in a telephone interview. “Intervention will definitely be on the minds of policy makers.”
The WSJ says on page one that the dollar dive is imperiling the entire Japanese economy, which is still on somewhat shaky standing after being dead in the water more or less for fifteen years. But economists say a weak dollar can help the U.S. mitigate the impact of the credit crisis by making its exports cheaper.
The NYT says the dollar’s woes are feeding on themselves, causing a downward spiral.