Recession Alarm Sounds As Economy Shrinks

GDP Has Worst Showing Since 2001; Consumers Cut Spending By Largest Amount In 28 Years

(CBS/AP)  The economy jolted into reverse during the third quarter as consumers cut back on their spending by the biggest amount in 28 years, the strongest signal yet the country has hurtled into recession.

The broadest barometer of the nation's economic health, gross domestic product, shrank at a 0.3 percent annual rate in the July-September quarter, the Commerce Department reported Thursday. It marked the worst showing since the economy contracted at a 1.4 percent pace in the third quarter of 2001, when the nation was suffering through its last recession.

The latest GDP reading marked a rapid loss of traction for the economy, which logged growth of 2.8 percent in the second quarter, and is sure to buttress the belief of many economists that the nation is in the throes of a painful downturn.

The deterioration reflected a sharp retrenchment by consumers, whose spending accounts for the largest chunk of national economic activity. Consumers ratcheted back their spending at a 3.1 percent pace in the third quarter, the most since the second quarter of 1980, when the country was in the grip of recession.

GDP measures the value of all goods and services produced within the United States and is the broadest barometer of the country's economic health.

While the third-quarter's contraction wasn't as deep as the 0.5 percent annualized decline analysts expected, the poor showing underscored the terrible toll of the housing, credit and financial crises.

Wall Street took the news in stride, pushing the Dow Jones industrial average up nearly 190 points in a relatively calm session.

Meanwhile, the Labor Department said Thursday that new claims for jobless benefits for the week ending Oct. 25 stood at a seasonally adjusted 479,000, the same as the previous week and above analysts' estimates of 475,000. Jobless claims above 400,000 are considered a sign of a struggling economy.

The grim reports come just days before the nation picks the next president on Nov. 4. Whether Democrat Barack Obama or Republican John McCain wins the White House, the incoming president will inherit a deeply troubled economy and a record-high budget deficit that could cramp his domestic agenda.

Many economists believe the economy will continue to contract into next year, which would more than meet a classic definition of recession - two straight quarters of shrinking GDP.

The National Bureau of Economic Research, the panel of experts that determines when U.S. recessions begin and end, uses a broader definition to determine recessions than two quarters of contracting GDP. That didn't happen in the last recession, in 2001. The NBER takes into account income, employment and other barometers. The finding is usually made well after the fact.

A collapse of the housing market and locked up lending have produced the worst financial crisis to hit the country in more than 70 years.

To cushion the fallout, the Fed slashed interest rates on Wednesday by half a percentage point to 1 percent, a level seen only once before in the last half century.

Fed Chairman Ben Bernanke has warned that the country's economic weakness could last for some time - even if the government's unprecedented $700 billion financial bailout package and other steps do succeed in getting financial and credit markets to operate more normally.

Unemployment now at 6.1 percent could hit 8 percent or higher next year. Disappearing jobs, battered nest eggs and retirement accounts, and falling home prices are likely to make consumers retrench even more.

Underscoring the strain faced by consumers, the report showed that Americans' disposable income fell at an annual rate of 8.7 percent in the third quarter, the largest quarterly drop on records dating back to 1947.

In the third quarter, consumers cut back on purchases of cars, furniture, household appliances, clothes and other things.They pulled back after the bracing impact of the government's tax rebates disappeared.

In addition to consumers, businesses cut back sharply in the third quarter. They cut spending on equipment and software at a 5.5 percent pace, the most since the first quarter of 2002, when the economy was struggling to recover from the 2001 recession.

Home builders slashed spending at a 19.1 percent pace, marking the 11th straight quarterly cut back, and fresh evidence of the depth of the housing slump.

Slower growth for U.S. exports - reflecting less demand from overseas buyers who are coping with their own economic problems - also factored into the weak GDP report. Exports grew at a 5.9 percent pace in the third quarter, a sharp deceleration from the second quarter's 12.3 percent growth rate.

The U.S. economic downturn in the third quarter was accompanied by higher inflation.

An inflation gauge tied to the GDP report showed prices - excluding food and energy - rose at a 2.9 percent pace, up considerably from the 2.2 percent growth rate in the second quarter. Although the new reading is outside the Fed's comfort zone, Fed officials predict the economy's slowdown will damp inflation pressures in the months ahead. The Fed has made clear that its primary mission at the moment is reviving the economy.

Banks Borrow Record Amount From Federal Reserve

Banks borrowed in record amounts from the Federal Reserve's emergency lending program over the past week, while investment banks drew loans at a slower pace.

The Fed's report, released Thursday, showed commercial banks averaged a record $111.9 billion in daily borrowing over the past week. That surpassed the old record — a daily average of $105.8 billion — from the prior week.

For the week ending Wednesday, investment firms drew $87.4 billion. That was down from $111.3 billion in the previous week. This category was recently broadened to include any loans that were made to the U.S. and London-based broker-dealer subsidiaries of Goldman Sachs, Morgan Stanley and Merrill Lynch.

The Fed report showed that its net holdings of "commercial paper" came to $144.8 billion on Wednesday. The Fed created a first-of-its kind program, which started Monday, to buy mounds of this crucial short-term debt that companies use to pay everyday expenses. The Fed has said that around $1.3 trillion worth of commercial paper would qualify.

The report also said insurance giant American International Group's loan from the Fed dropped to $83.5 billion, from $90.3 billion last Wednesday, as the company repaid some of the money. The Fed has said it would loan a total of $123 billion to the firm.

Squeezed banks and investment firms are borrowing from the Fed because they can't get money elsewhere. Investors have cut them off, moving their money into safer Treasury securities. Financial institutions are hoarding whatever cash they have, rather than lend it to each other or customers. The lockup in lending has contributed to a sharp slowing in the overall economy.

[shanev137]

Is this even news or a shock to anyone really?

[gop_will_win]

OMG! The thought of an Obama victory is worst than I thought!

[incog-nito]

Meanwhile, Exxon-Mobil posts the biggest quarterly profit ever.

Mission Accomplished.

[legacyabq]

I''m sick of this recession lie

This is an ADJUSTMENT

How long can consumer spending go on at 12 to 25 % interest on 5 different credit cards for a bunch of flimsy junk from china??
How many NEW cars do the big 3 think people can buy???

[windmaster12]

Mccain, Bush, and the rest of the GOP-

Managed to take Clinton''s surplus,
And 8 years later they replaced it with:

Bigger Gov''t --
Though they promised Smaller Govt-

Greater Debt-
Though they promised fiscal responsibility-

The largest Trade Deficit in history-
Outsourcing millions of US jobs

Then they Pulled a Commie Chavez move
Nationalizing Fannie and Freddie
The Socialization of our Financial Institutions-
With Billions in tax payer paid bailouts-

Institutional Welfare for Wall Street Incompetents-

War in Iraq and Afghanistan
Costing us 10 Billion + a month
Ridicule throughout the world--

But they did give Tax breaks and incentives to:
The upper 3% -
To Big Oil,
And the GOP Defense Conglomerates--


The Choice is Astonishingly Clear---

VOTE GOP
VOTE MCSAME

CONTINUE THE BUSH LEGACY
FOUR MORE GLORIOUS YEARS
OF GOP BS

[tannerbird]

The things that will cost McCain the WHITEHOUSE [1] healthcare plan [2] Palin [3] voting with Bush 90% of the time [4] age [5] he is not connected with the avagerage working people [6] keep giving tax breaks to the rich. John has never had to work a real job and he has no real clue what the avagrage person does to make it in life.

[joe68sg1]

Consumers Cut Spending By Largest Amount In 28 Years

Who has any money except the rich people?
OK rich people, start spending now or face recession !!!

The republiCONS have finally brought a recession on us to go with all the other failed policies we have endured for the last 8 years.
How can we give tax breaks to big oil on top of record profits?
The big lie of tax breaks create jobs should finally be put to rest...yet McSame keeps saying it.

Why hasn''t big oil hired more people with their tax breaks? Let them hire some of the people off the unemployment lines with their billions $ tax breaks.

Pure republiCON BS !!!

Tax breaks DO NOT CREATE JOBS...
Regular people buying products create jobs...yet we get NO TAX BREAKS from McBush.

The republiCONS have turned the economy up-side-down.
Time to go all you CONS ... power to the people, not corporations.

[tannerbird]

Republicans save your money and try again in four years.

[thebigdiffer]

In the meantime, Exxon Mobile just posted an all time recor quaterly profit. I guess that I will vote for McCain so he can keep on givin much needed tax cuts to Exxon !! That4s the real "spreading the wealth" philosophy under for Bush&McCain: save Wall Street, cut Corporate Taxes, transfer public money to Raytheon or Halliburton and cut expenses back at home on education, health care, infrastructures ... Let the middle class to take care by themselve while the Republicans spread the wealth among corporate America !!! Obama-Biden 2008

[tannerbird]

The working people of this country have got it now put your money where your mouth is and they can have what the want.

[joe68sg1]

gop_will_win : OMG! The thought of an Obama victory is worst than I thought!
-------------------------------------
Get used to it dude...maybe we can start to put things right again without your brand of government.

Time to go all you CONS ... power to the people, not corporations.
Government FOR THE PEOPLE, not corporations !!!

[formrusmcsgt]

The economy jolted into reverse during the third quarter as consumers cut back on their spending by the biggest amount in 28 years, the strongest signal yet the country has hurtled into recession.
---

The benefactors of Bush''s "trickle down" policies?

Exxon Mobil Corp. set a quarterly profit record for a U.S. company today, surging past analyst estimates, CNNMoney.com reports. Exxon Mobil, the leading U.S. oil company, said its third-quarter net profit was $14.83 billion, or $2.86 per share, up from $9.41 billion, or $1.70, a year earlier.

http://www.cnn.com/

[formrusmcsgt]

Underscoring the strain faced by consumers, the report showed that Americans'' disposable income fell at an annual rate of 8.7 percent in the third quarter, the largest quarterly drop on records dating back to 1947.
---

The benefit of "trickle down" economics, no doubt.....

[trillion1]

Obama is "desperate"? LOL. If Obama is "desperate" then why do almost all the smears and lies come from the rightwing trolls. Why don''t they start stating facts on why mccain would be a better president.

[bill517]

CLINTON''S ''GOOD TIMES'' WERE FRUITS BORN FROM BUSH SR.''S WISE LEADERSHIP.

BUSH JR.S LEAN TIME WERE FRUIT BORN FROM CLINTON MISMANAGEMENT, SPECIFICALLY LEGALIZED GAMBLING ON HOME MORTGAGES.

THINK WE''RE IN TROUBLE NOW, JUST WAIT TILL AIRHEAD PELOSI TINKERS AROUND FOR AWHILE.

[bill517]

MOST EXXON MOBIL SHARES ARE OWNED BY RETIREES TO WORKED ALL THEIR LIVES AND SAVED THEIR MONEY AND PUT IT INTO 401KS. THEY''RE TRYING TO BUY PILLS WITH THEIR DIVIDENDS. SURE, THEY''RE THE BAD GUYS. RIGHT.

LETS GET ''EM!

[longtree-2009]

recession alarm? some states are already in a recession such as CA. what the heck, we can always borrow another 500 billion from the chinese. the chinese own us since nearly every product is made there and we have to buy it.

[tejasdemo]

And you can count on me spending even less money until greedy a holes like Exxon and insurance companies stop raping everybody.

[joe68sg1]

bill517

McBush Sr, lol...read.my.lips...
Goodbye republiCON idiots...
Don''t let the door hit you on the way out !!!

[txgrouch2007]

borrow another 500 billion from the chinese. the chinese own us since nearly every product is made there and we have to buy it.
Posted by longtree at 10:21 AM : Oct 30, 2008

HINT that''s why they lend us so much money. THEY HAVE TO so we can keep buying their stuff.

With our DOA economy, we couldn''t buy squat from China unless they kept bailing us out by lending money to us.

WHEN OUR ECONOMY TANKS AND WE CAN''T KEEP BUYING MORE IMPORTS THAN WE MAKE FROM EXPORTS, China will STOP LENDING MONEY TO US.

You want to see our economy in a REAL tailspin, wait until NOBODY WILL LEND MONEY TO US ANYMORE because we aren''t buying their exports.

[joe68sg1]

republiCONS = deficit spending

Take billions in surplus = trillions in debt

Thanks republiCONS...you robbed us blind, and made us feel good while doing it. You made the bed, now lay in it !!!

Power to the people, not corporations !!!

[windmaster12]

Mccain, Bush, and the rest of the GOP-

Managed to take Clinton''''s surplus,
And 8 years later they replaced it with:

Bigger Gov''''t --
Though they promised Smaller Govt-

Greater Debt-
Though they promised fiscal responsibility-

The largest Trade Deficit in history-
Outsourcing millions of US jobs

Then they Pulled a Commie Chavez move
Nationalizing Fannie and Freddie
The Socialization of our Financial Institutions-
With Billions in tax payer paid bailouts-

Institutional Welfare for Wall Street Incompetents-

War in Iraq and Afghanistan
Costing us 10 Billion + a month
Ridicule throughout the world--

But they did give Tax breaks and incentives to:
The upper 3% -
To Big Oil,
And the GOP Defense Conglomerates--


The Choice is Astonishingly Clear---

VOTE GOP
VOTE MCSAME

CONTINUE THE BUSH LEGACY
FOUR MORE GLORIOUS YEARS
OF GOP BS

The GOP ran the Titanic aground
Now they are blaming the passengers
ie (anyone but them)
as they sail off in their first class lifeboats!!!

[lochlan-2009]

Fudged numbers and controled markets with carefully manipulated reports that the bought and owned media use to hide the truth,(atlest the whole truth), and control when they release and the accuracy of the information (and ommited information) to the masses.

[trillion1]

The rightwing trolls are really earning their money today.

[irmcvet97]

Fudged numbers and controled markets with carefully manipulated reports that the bought and owned media use to hide the truth,(atlest the whole truth), and control when they release and the accuracy of the information (and ommited information) to the masses.

Posted by lochlan at 11:03 AM : Oct 30, 2008

HELLO!! You don''t need any "reports" to show you how badly the Republican''s and Trickle Down has failed... All you need is a car, IF you can afford to put gas in it, and drive a little. LOL

[irmcvet97]

Get clue sonny. They''''re not smears or lies, but truths until OBammy proves otherwise.

Posted by listenupfool at 10:51 AM : Oct 30, 2008


Now IN the America I grew up in and in the America My POP, you know the GREATEST GENERATION, left me, it''s up to the MUDSLINGERS to show proof! Course you Joe McCarthy types have NEVER been able to do things like that... come to think of it you people haven''t done much of anything POSITIVE in a very long time.

[irmcvet97]

easy to see why libs like this clown are upset....they choose careers that are capable of being outsourced or that someone sneaking into the country and not speaking english is capable of doing. smart person would train for a better job.

Posted by jamesm12341 at 11:01 AM : Oct 30, 2008


You haven''t a clue WHAT this American does for a LIVING!! LOL Just MORE trash from those who THINK they are Superior!!

[joe68sg1]

jamesm12341

This country needs to be run by people, not corporations.

The jobs will come when people can buy things again, not from tax breaks to big corps. If people buy products, big corps have to hire more people.

How about "help me McBush...my stock values are dropping because I made bad investmants"...
700 billion to who? Not regular people, that is for sure. To rich people that need it like a hole in the head.

Corporate welfare is republiCON BS

Power to the people, not corporations !!!

[irmcvet97]

successful people not having any problems at all.......are you not successful?

Posted by jamesm12341 at 11:14 AM : Oct 30, 2008

Let me help you out here! Let''s read the post together and MAYBE you poor simple little mind can UNDERSTAND IT! It says YOU, meaning the poster... With me so far? Good! You do NOT need a Report to show the failure of the Republican Policies! Got that much? Good! All you need is to get in YOUR car and drive! Now what THAT has to do with YOUR post is beyond me!! Have you considered maybe picking up some night course''s?? It would help you READ and UNDERSTAND the printed word! It might also, help with your pretending to be "Superior"!! Think about it!

[joe68sg1]

jamesm12341

Are you on here to make people laugh?
Are you really a stand up comic posing as a concerned citizen?
Or are you just another republiCON idiot following the party line to the death?
Maybe you should be on the stage...leaves in 5 minutes
You ARE THE JOKE !!!

[b0bbytspin]

You know what I changed my mind about Obama! I think he will be better for national security and the economy!

Plus sarah palin $150,000.00 on clothes, most Americans could have bought a home for that amount!

Besides I think Sarah Palin is really a Terrorist

Breaking News: The Terrorist Group AKA Alaska Independent party Calling on Russia to help secede from the Union
www.chilitoz.com
Extremists Mark Chryson and Steve Stoll former leaders of the Alaska Terrorist group AKA Independence Party and friends of Sarah Palin are calling on Russia to help them gain independence from the United States.

Watch video of Sarah palin addressing The Alaska Terrorist Group also known as The Independence party. They are calling for a civil war against the mainland.
www.chilitoz.com

[antoniof123]

You know what I understand that you want to root for you team Republicans but there comes a point that the failures far out weight what you can root for.

Look around you and see what your division issues have done. Now also remember the Democrats are poised to sweep congress this hasn''t been seen in 50 years.

The last time was because the conservatives refused to bow to the majority and that was due to McCarthy. It cost the Republicans 40 years that was just for a drunken senator. How long do you think a Presidnet will cost the Republicans?

Keep wishing but that will not change reality.

[joe68sg1]

jamesm12341

I would feel a whole lot better when you and your fellow republiCON idiots are OUT THE DOOR !!!

So turn off the light when you leave, and watch out for that door...don''t let it hit you on the way out.

Look at the bright side, there is always demand for a stand up comic like you...in case you need a second career...lol

[joe68sg1]

jamesm12341

There you go again...Ha Ha
I am telling you, comic is your calling...you are SO FUNNY !!!
Watch that door...get the light please...

[joe68sg1]

Oh, BTW jamesm12341

If you can do a McCain/McPalin immitation I will hire you myself. I could make you comic of the year with your really funny jokes.
Again, watch the door, get the lights...
Goodnight Chet !!!

[incog-nito]

This just in! Statement from the White House on the economy: "In light of the economic downturn, President Bush wants to reassure the American people that the economy is still doing great, as evidenced by the record profit of the Exxon-Mobil corporation. President Bush also wants to make it clear that any hardship visited on the American people is of course due to someone else''s fault, as always."

[txgrouch2007]

You know what I understand that you want to root for you team Republicans but there comes a point that the failures far out weight what you can root for.
Posted by antoniof123 at 11:26 AM : Oct 30, 2008

There comes a point where we can say that about BOTH PARTIES.

We are at that point.

ANYBODY who continues to defend EITHER party is a traitor and an enemy of the country.

I have ALREADY voted against all incumbents. I voted for Obama. And I am a staunch Republican.

[checkthepast]

You gotta love the media... ''shrank o.3% annual rate in the July-September quarter...'' so the quarter rate is one-fourth of .3 percent which is $1 on each $1,333.33!

They make it sound like such a tragedy...
''the worst showing since the economy contracted at a 1.4 percent pace in the third quarter of 2001, when the nation was suffering through its last recession''

A lot of people have did very well after the ''Great Recession'' of 2001 and according to their own figure that GDP ''shrinkage'' was 5 times worse than what we are experiencing now.

Anything to dis the encumbants... or.. if there aint no news.. make some!

[walt1944-2009]

FINALLY, numbers are coming out of Washinton that ABSOLUTELY show we are in a recession!

Naturally, this is something that the average person has known for the past year if not longer!

Now that we are here, what happens next? After the election when Obama becomes the Great Emperor-elect, and John McBush McCain is retired to a senior citizen''s facility, will the Great Emperor Bush II cause even more trouble by starting wars with Syria and Pakistan, thus deflecting Obama from fixing things here? Or, perhaps, he will bankrupt the country by "bailing out" every bank and business in sight so that corporate BIG SHOTS can have one last BIG FLING?

He may even have VP Darth Vader Cheney write an executive order (remember the Great Emperor cannot write!) stating that with the country now in a state of recession, he regards it as a state of emergency which demands that HE stay in office, and therefore refuse to leave the Oval Office until the "emergency" is over (sometime in the next 4 years, when Palin is ready, MAYBE!)!

Considering the maniacs and "mentally-challenged" we have had in office over the past 8 years, anything can still happen.

IT AIN''T OVER TILL IT''S OVER!!!!

SIG HEIL, I''LL THINK OF SOMETHING SO I CAN STICK AROUND!!!, BUSH!!!
sig heil, YOU WON''T GET RID OF ME THAT EASY EITHER!!!, McBush!!!
sig heil, I''M STAYING HERE TOO; MY "FIRST DUDE" CAN RUN ALASKA!!!, Palin!!!

[checkthepast]

''Exports grew at a 5.9 percent pace in the third quarter, a sharp deceleration from the second quarter''s 12.3 percent growth rate''

You mean even in the face of the worldwide economy, exports didn''t drop? They actually GREW at 5.9%? That maintains half of the phenomenal growth of the previous quarter is is an excellent report in the face of current economics.

I guess it depends on your half-full vs. half-empty outlook and your dis the encumbants agenda.

[jon_mccain]

Posted by joe68sg1 at 11:33 AM : Oct 30, 2008

dont need 2nd career, i was smart enough to train for in demand job....must be scary for you when all you know is factory jobs that someone who doesnt even speak english can do....but, we all had choices in life

Posted by jamesm12341

I wouldn''t have though of spell checker on the CBS comment boards as being an "in demand" job, but I guess I was wrong.

[checkthepast]

FINALLY, numbers are coming out of Washinton that ABSOLUTELY show we are in a recession!
Posted by walt1944

Actually this is the media ''inflating'' what the numbers mean.
I repeat....
You gotta love the media... ''''shrank o.3% annual rate in the July-September quarter...'''' so the quarter rate is one-fourth of .3 percent which is $1 on each $1,333.33!

They make it sound like such a tragedy...
''''the worst showing since the economy contracted at a 1.4 percent pace in the third quarter of 2001, when the nation was suffering through its last recession''''

A lot of people have done very well after the ''Great Recession'' of 2001 and according to their own figure that GDP ''''shrinkage'''' was 5 times worse than what we are experiencing now.

Anything to dis the encumbants... or.. if there aint no news.. make some!

[wherenextnow]

This recession will get a lot worse. We haven''t begun to see the effects of the Financial Sector Greed-induced collapse.

[easeup-2009]

WE''''RE DOOMED!! don''''t hold on to your stocks hold on to your socks!!

Posted by Hacker11001 at 12:21 PM : Oct 30, 2008

Wow Chicken Little is on this thread. Big surprise.

[wherenextnow]

Posted by easeup at 12:25 PM : Oct 30, 2008
-----------

Desperately trying to hold on to the RINOPublican dream are you? HAHAHAHAHA!!!

[wdrussell1]

You ever notice stories like this?
This is the worst(whatever)in X number of years.
It always takes you back to when another republican was president.

[easeup-2009]

Desperately trying to hold on to the RINOPublican dream are you? HAHAHAHAHA!!!

Posted by wherenextnow at 12:27 PM : Oct 30, 2008

Not really, just tired of that moron & his soup line talk. What an idiot.

[wherenextnow]

Not really, just tired of that moron & his soup line talk. What an idiot.

Posted by easeup at 12:30 PM : Oct 30, 2008
------------

Yeah, and Hoover said it would never happen too.

[checkthepast]

don''''t hold on to your stocks hold on to your socks!!
Posted by Hacker11001

Wow Chicken Little is on this thread. Big surprise.
Posted by easeup

but at least hes holding on to his socks.. something he must be accustomed to.

[easeup-2009]

he,he

Posted by Hacker11001 at 12:42 PM : Oct 30, 2008

I can''t believe I bit on your troll bait. You''re good. Not gop_will_win good, but good.