Embracing Recession

It's official: The U.S. economy has been in recession since last December, according to new figures from the National Bureau of Economic Research. While confirming "what many Americans had already been feeling in their bones," in the words of the New York Times, the new figures also tell a portentous tale: "the current economy downturn is already longer than the average for all recessions since World War II, according to the committee of economists responsible for dating the nation’s business cycles." The stock market reacted with typical restraint—the Dow Jones industrial average "plunged" 679.95 points, or 7.7 percent, while the S&P 500 fell 80.03 points, or 8.9 percent, BusinessWeek reports. Not to be outdone, the Nasdaq also shed 8.95 percent. What will stop the rot? Further reductions in short-term interest rates are "certainly feasible," Federal Reserve Chairman Ben Bernanke said yesterday. But with the "benchmark rate already at 1%, more cuts would bring the rate to near zero, prompting concern that the Fed would be out of recession-fighting ammunition," writes the Wall Street Journal. Over at Treasury, they're looking to expand the current bailout by "reviewing applications from hundreds of banks seeking rescue funding," as Secretary Hank Paulson told a Fortune 500 forum that he is "actively" developing new programs to correct the financial fallout, CNN Money reports.

The hours are ticking before the Big Three automakers return to Capitol Hill to make their case for a bailout. Ford says it has a plan, reports the WSJ: "It is retooling itself to build small fuel-efficient cars and break from the past strategy of focusing mainly on large pick up trucks and sport-utility vehicles." Now why didn't we think of that? To show how just how serious he is, Ford Chief Executive Alan Mulally will travel to Washington not by corporate jet but in a Ford Escape Hybrid—and that's not because he's offering to take a pay cut from his last year’s compensation of $21 million, as the NYT reports. That might be one of the few SUVs that Ford hangs on to. As the NYT piece posits, with the Big Three now selling fewer than half of all new vehicles in this country and yet still producing 112 different car and truck models, they will have to show Congress they are serious about trimming their fleet of brands. In this automotive climate, it's not a surprise that U.K. luxury car maker Aston Martin is being forced to cut one-third of its work force.

Against this and other bad economic news the British pound experienced its "largest one day fall in percentage terms since sterling crashed out of the Exchange Rate Mechanism (ERM) in 1992," the BBC reports. The pound fell against the dollar by 5.2 cents to $1.486, but at least it's in good company—the Chinese Yuan fell by its single largest margin on record against the dollar "after dealers bet that China's central bank might use a weaker yuan to help support economic growth," the WSJ reports. Growth is exactly what China needs if another WSJ report is any indication. The newspaper writes that with growing unemployment in its cities, China faces a "wave of reverse migration that has the potential to shake the stability of the world's most populous nation."

The first day of the month saw a raft of banking-sector job losses with JPMorgan Chase cutting 9,200 positions—nearly 20 percent of its work force—at newly acquired Washington Mutual. Over 3,000 of those cuts will come from Seattle. Over in the U.K., HSBC announced it was cutting 500 jobs and Credit Suisse a further 600, the BBC reports. And things just get worse for Goldman Sachs. It is expected to report a loss of $2 billion for its last quarter.

Finally, here's one sector of the news business that is still gung ho. Digg, the online news aggregation and ratings site, is officially not for sale. CEO Jay Adelson tells BusinessWeek that the goal of the company is "to build an independent business that reaches profitability as quickly as possible." He better hope the news industry that his site depends on for content can stay afloat long enough to realize that ambition.