This afternoon Associated Press is reporting:
NEW YORK - Stocks slumped for a second straight session Tuesday after saw an unexpected contraction in the service sector as evidence that the economy is sinking into recession. The fell more than 300 points, while bond prices rose.
The said its January index of the service sector, which accounts for about two-thirds of the economy, dropped below 50, indicating contraction. Economists had been expecting another month of growth; the last time the service sector contracted was in March 2003.
"The report drives a nail into the coffin from investors' minds that we're in a recession," said Todd Salamone, director of trading at Schaeffer's Investment Research. "That doesn't mean stock prices in the months ahead will be lower. But when you see headline numbers like this, there tends to be a reactionary sell."
There are widely varying views on the economy. Some "experts" are still saying that things aren't as bad as we think
While the average consumer thinks that things are worse than the experts are saying.
The only thing that everyone is certain of is that no one really understands how to bolster this house of cards built on credit and debt. How you view the economy depends on how much money you have in your pocket, how much debt you're carrying and how you view your future.
The Boom Was A Bust For Ordinary People
By Barbara Ehrenreich, The Washington Post.
Posted February 5, 2008.
Our challenge isn't just to prop up stock prices but to rebuild an economy in which everyone shares the good times.
It begins to sound a bit naughty -- all this talk about the need to "stimulate" the economy, as if we were discussing how to make a porn film. I don't mean to trivialize our economic difficulties or the need for effective government intervention, but we have to face a disconcerting fact: For years now, that strange stimulus-crazed beast, the economy, has been going its own way, increasingly disconnected from the toils and troubles of ordinary Americans.
The economy, for example, has been expanding, at least until now, and growth is supposed to guarantee general well-being. As long as the gross domestic product grows, World Money Watch's Web site assures us, "so will business, jobs and personal income."
But hellooo, we've had brisk growth for the past few years, as the president has tirelessly reminded us, only without those promised increases in personal income, at least not for the poor and the middle class. According to a study just released by the Economic Policy Institute, real wages actually fell last year. Growth, some of the economists are conceding in perplexity, has been "decoupled" from widely shared prosperity.
I first began to sense this in the boom years of the late 1990s, when I was working in entry-level jobs for my book "Nickel and Dimed." While the stock market soared and fortunes were being made in the time it takes to say "IPO," my $6-to-$8-an-hour co-workers lunched on hot dog buns because that was all they could afford and, in some cases, fretted about whether they could find a safe place to sleep.
Growth is not the only economic indicator that has let us down. In the past five years, America's briskly rising productivity has been the envy of much of the world. But again, there's been no corresponding increase in most people's wages. It's not supposed to be this way, of course. Economists have long believed that some sort of occult process would intervene and adjust wages upward as people worked harder and more efficiently.
We like to attribute our high productivity to technological advances and better education. But a revealing 2001 study by the consulting firm McKinsey & Co. also credited America's productivity growth to "managerial ... innovations" and cited Wal-Mart as a model performer, meaning that our productivity also relies on fiendish schemes to extract more work for less pay. Yes, you can generate more output per apparent hour of work by falsifying time records, speeding up assembly lines, doubling workloads and cutting back on breaks. That may look good from the top, but at the middle and the bottom, it can feel a lot like pain.
And what about the unemployment rate? The old liberal certainty was that "full employment" would create a workers' paradise, with higher wages and enhanced bargaining power for the little guy and gal. But we've had nearly full employment, or at least an official unemployment rate of under 5 percent, for years now, without the predicted gains. What the old liberals weren't counting on was a depressed minimum wage, weak unions and a witch's brew of management strategies to hold wages and salaries down.
So thoroughly is the economy decoupled from ordinary experience that according to a CNN poll, 57 percent of Americans thought we were already in a recession a month ago. Economists may complain that this is only because the public is ignorant of the technical definition of a recession, which specifies at least two consecutive quarters of negative growth. But most of the public employs the more colloquial definition of a recession, which is hard times. And -- far removed from whatever happens on Wall Street, the Nikkei, Dax, or the curiously named FTSE -- most Americans have been living in their own personal recession for years.
Watch For The Signs
Life In The Real World Is Getting Harder
Are You Preparing For A Recession?