Merrill Lynch Declares U.S. in Recession

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Merrill Lynch Declares U.S. in Recession

NEW YORK -- The likelihood of a recession in the U.S. this year is certain, according to a report from banker Merrill Lynch, which stated the government's recent employment information released Friday confirmed the U.S. is in the first month of a recession, BBC News reported.

The firm's chief economist for North America, David Rosenberg, stated poor unemployment statistics and weak Christmas spending have tipped the world's biggest economy over the brink, the National Business Review reported.

"According to our analysis, this [recession] isn't even a forecast anymore, but is a present day reality," he stated, noting the four key barometers used by the National Bureau of Economic Research (NEBR) -- employment, real personal income, industrial production and real sales activity in retail and manufacturing.

He stated these "seem to have peaked around the November-December period, strongly suggesting that we are actually into the first month of a recession."

If the U.S. is in fact in recession, it would be the first time in 16 years, according to the National Business Review.

An official ruling on whether the U.S. is in recession is made by the NBER, and the decision may not come for two years, according to the BBC News report. 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, the report stated.

Merrill Lynch stated the employment figure showing the jobless rate hitting 5 percent in December was the final key.

The Merrill Lynch report added that Wall Street's current consensus that there is a good chance of avoiding a recession is "in denial," and stated, "To say that the backdrop is 'recessionlike' is akin to an obstetrician telling a woman that she is 'sort of pregnant.'"

However, other banks including Lehman Brothers and the NBER are disagreeing with the report.

"I think we're not in a recession now," NBER president Martin Feldstein told CNBC. "But, I think there is a serious risk that it could get worse and we could see an actual downturn."

In addition, U.S. Treasury Secretary Henry Paulson told CNBC economic growth would continue and that the government is considering options to enable it to do so, according to a Forbes report.

Paulson told CNBC it is clear economic growth has slowed considerably, but noted growth will continue. President Bush is considering options to sustain growth, according to Paulson, who did not go into detail on any program, Forbes reported.