- The Washington Times - Monday, February 11, 2008


Empty homes and for-sale signs clutter neighborhoods. You’ve lost your job or know someone who has. Your paycheck and nest egg are taking a hit.

Could the country be in recession?

Sixty-one percent of the public thinks the economy is suffering through its first recession since 2001, according to an Associated Press-Ipsos poll.

The fallout from a depressed housing market and a credit crunch nearly caused the economy to stall in the final three months of last year. Some analysts, like the majority of people questioned in the poll, say the economy may be shrinking now. The worry is that consumers and businesses will hunker down further and pull back spending, sending the economy into a tailspin.

“Absolutely, we’re in a recession,” said Hilda Sanchez, of Waterford, Calif.

Squeezed by high energy and food bills, “we can’t afford the things that we normally buy,” she said. “We are cutting corners in our spending. For our groceries, we are buying a lot of generic and we are eating out less.”

For many, the meltdown in the housing and mortgage markets has proved especially disturbing. Record numbers of people were forced from their homes, unable to afford the monthly loan payments. People watched their single biggest asset fall in value, a reason to tighten the belt.

“Obviously the housing market is creating deep concern. And one of the real problems could be that if people, as a result of their value of their homes going down, kind of pull in their horns,” President Bush said yesterday.

Credit has become harder to get, thwarting would-be home buyers, adding to the glut of unsold homes and aggravating the housing industry’s woes.

“For-sale signs are everywhere. In my area, 35 to 40 homes are standing there and aren’t even complete. There aren’t any buyers,” said Jim Sims of Greer, S.C.

Nanette Dahlin, of St. Louis Park, Minn., called the situation “very scary.” She said friends in Madison, Minn., put up their home for sale and reduced the asking price more than $100,000 in just a week. “They are in bad shape,” Ms. Dahlin said.

For all of last year, the economy grew by 2.2 percent. That was the weakest performance since 2002, when the country was struggling to recover from the latest recession.

The housing collapse was the biggest culprit in 2007. Builders lowered spending on housing projects by 16.9 percent on an annualized basis, the most in 25 years.

The job market is faltering — a point driven home by a report showing that employers cut jobs in January for the first time in more than four years.

Employment concerns are contributing to darker feelings about the economy and people’s financial well-being. Consumer confidence, as measured by the RBC Cash Index, dropped to a mark of 48.5 early this month. It was the worst reading since the index began in 2002.

A cooling job market along with high energy and food prices are taking a toll on paychecks. Workers’ average weekly earnings, adjusted for inflation, fell 0.9 percent last year. In 2006, earnings grew by a solid 2.1 percent.

Wall Street is unsettled and, as a result, people’s nest eggs are not what they once were.

In fact, that was the top economic worry in the AP-Ipsos poll. Fifty-nine percent said they were worried “a lot” or “some” about the drop in the value of stocks and retirement investments.

“I really dread opening my [financial] statements,” Mr. Sims said.

By one rough rule of thumb, a recession occurs when the economy shrinks in two consecutive quarters, or six straight months. That did not happen in the last recession, though. The economy contracted in the first quarter of 2001, turned positive in the second quarter, shrank in the third quarter and turned up again in the final quarter of that year.

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