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Recession in the US 'has arrived' Recession in the US 'has arrived'
(about 6 hours later)
The feared recession in the US economy has already arrived, according to a report from Merrill Lynch.The feared recession in the US economy has already arrived, according to a report from Merrill Lynch.
It said that Friday's employment report, which sent shares tumbling worldwide, confirmed that the US is in the first month of a recession.It said that Friday's employment report, which sent shares tumbling worldwide, confirmed that the US is in the first month of a recession.
Its view is controversial, with banks such as Lehman Brothers disagreeing.Its view is controversial, with banks such as Lehman Brothers disagreeing.
An official ruling on whether the US in recession is made by the National Bureau of Economic Research, but this decision may not come for two years. An official ruling on whether the US is in recession is made by the National Bureau of Economic Research, but this decision may not come for two years.
The NBER defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months".The NBER defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months".
It bases its assessment on final figures on employment, personal income, industrial production and sales activity in the manufacturing and retail sectors.It bases its assessment on final figures on employment, personal income, industrial production and sales activity in the manufacturing and retail sectors.
Merrill Lynch said that the figures showing the jobless rate hitting 5% in December were the final piece in that puzzle.Merrill Lynch said that the figures showing the jobless rate hitting 5% in December were the final piece in that puzzle.
"According to our analysis, this isn't even a forecast any more but is a present day reality," the report said."According to our analysis, this isn't even a forecast any more but is a present day reality," the report said.
It added that the current consensus view on Wall Street that there is a good chance of avoiding a recession is "in denial". 'Actual downturn'
But NBER president Martin Feldstein denied Merrill's claims.
"I think we're not in a recession now," he told CNBC.
"But I think there is a serious risk that it could get worse and we could see an actual downturn," he added.
Merrill said that the current consensus view on Wall Street that there is a good chance of avoiding a recession is "in denial".
It also objected to the use of euphemistic terms for the state of the economy.It also objected to the use of euphemistic terms for the state of the economy.
"To say that the backdrop is 'recession like' is akin to an obstetrician telling a woman that she is 'sort of pregnant'," the report said."To say that the backdrop is 'recession like' is akin to an obstetrician telling a woman that she is 'sort of pregnant'," the report said.