Two More Dire Signs For U.S. Economy

GDP Falls Half A Percent; New Home Sales Fall To A Nearly 20-Year Low

(CBS/AP)  The longest U.S. recession in a quarter century is snowballing, and some analysts warn that economic activity could plunge as much as 6 percent this quarter, which would be the largest decline since 1982.

While government figures released Tuesday for the third quarter showed only a 0.5 percent drop in the gross domestic product, a key indicator of economic health, two reports on home sales sketched a bleaker picture. Demand for both new and existing homes fell more sharply in November than expected.

In addition, GDP is likely falling at a sharper pace in the current quarter because of widening fallout from the worst financial crisis to hit the country since the Great Depression. If GDP does plunge 6 percent in the fourth quarter, it would be the sharpest such decline since a 6.4 percent drop in the first quarter of 1982.

"It will get a lot worse before it gets better," said Nariman Behravesh, chief economist at IHS Global Insight, a Lexington, Massachusetts, forecasting firm. "We are in the midst of the worst recession in the postwar period, even factoring in a massive stimulus program."

Economists said they saw no likelihood of a quick turnaround in housing or the overall economy, given that the credit markets remain locked despite a $700 billion financial rescue package and billions of dollars of loans supplied by the Federal Reserve. Mortgage financing has dried up for many potential buyers, further damaging a housing industry struggling with a tide of foreclosures.

Wall Street pulled back in quiet trading ahead of the holiday after the reports were released Tuesday morning. The Dow Jones industrial average finished lower for the fifth straight day, falling 100 points to close near 8,419.

Signs of the growing recession are showing up on main street too. Holiday thefts are up sharply, reports CBS News correspondent Randall Pinkston. And Americans' reliance on food stamps has jumped around the country as well, reports CBS News correspondent Byron Pitts.

The Bush administration warned that the country should be prepared for worse news to come.

"The fourth quarter, because of the credit crisis, the standstill in credit as markets froze up and the financial market turmoil, will be significantly weaker," presidential spokesman Tony Fratto told reporters at the White House on Tuesday.

President-elect Barack Obama's administration is assembling a stimulus package that could reach $850 billion for spending on infrastructure such as roads and bridges, aid to states, modernizing schools and energy project.

Vice President-elect Joe Biden told a meeting of Obama's economic team that as the economy worsens, the need for a bold plan "grows every day."

Still, private economists said that even if the Obama administration achieves its goal of enacting a stimulus program in January, it won't arrive soon enough to keep the economy from enduring a severe downturn well into next year.

Behravesh said he thinks the recession will bottom out this quarter with the biggest quarterly drop yet in GDP. But he forecast another sizable decline of around 4 percent in the first three months of 2009, and then a slightly smaller drop in the second quarter before the economy begins to rebound next summer.

Other economists are even more pessimistic. Joshua Shapiro, chief U.S. economist at MFR Inc., said he did not see the GDP turning positive until 2010. "There were just so many excesses that the correction process is going to take a long time," he said.

The current recession began in December 2007. That means it's already the longest downturn since the 16-month recession of 1981-82. That downturn and another 16-month slump in 1973-75 are tied as the longest recessions since World War II.

Some analysts said the downturn could be the most severe since the Great Depression, if measured by both duration and lost output.

Commerce reported Tuesday that GDP fell at an annual rate of 0.5 percent in the third quarter, which was unchanged from the estimate the government made a month ago. But their report showed that corporate profits fell 1.2 percent during the quarter, the fifth straight quarterly drop and even worse than the 0.9 percent decline estimated a month ago.

Separately, the Commerce Department said new home sales dropped 2.9 percent in November to an annual sales rate of 407,000 units, the slowest pace in nearly 18 years. And the National Association of Realtors said sales of previously owned homes fell by 8.6 percent to an annual rate of 4.49 million units.

The median sales price of an existing home plunged 13.2 percent in November to $181,300. That was the biggest year-over-year drop since 1968. The median, or midpoint, price for a new home sold in November also fell sharply, dropping 12.7 percent to $220,400.

The 0.5 percent drop in GDP in the third quarter followed a 2.8 percent increase in the spring, a period that was boosted by the distribution of millions of economic stimulus payments. GDP was up 0.9 percent in the first quarter after having dropped by 0.2 percent in the fourth quarter of 2007.

The National Bureau of Economic Research has determined that the country slipped into a recession in December 2007.

While a common rule of thumb for a recession is two consecutive quarters of falling GDP, the NBER uses other data to determine when recessions begin and end, including employment statistics. The economy has lost jobs every month since January. It's shed 1.9 million payroll jobs this year, including more than a half-million jobs lost just in November. The unemployment rate now stands at a 15-year high of 6.7 percent.

For the government's last look at July-September GDP, there were only minor revisions. Spending by consumers plunged at an annual rate of 3.8 percent, slightly more than the 3.7 percent fall reported a month ago. It was the biggest decline in consumer spending, which accounts for two-thirds of economic activity, in nearly three decades. An 8.6 percent drop was recorded in the second quarter of 1980.

Residential construction, where the current economic troubles began, fell at an annual rate of 16 percent in the third quarter, while nonresidential construction, which had been buffering the construction industry, faltered as well, dropping by 1.7 percent.

The Treasury Department, meantime, said it has provided an additional $4.7 billion to 92 banks as part of the government's $700 billion rescue of the financial system.

The department released a list of 49 banks that got final approval last Friday to receive $2.8 billion. It said an additional 43 banks received final approval Tuesday, but those names will not be released until Monday.

Treasury also confirmed that it had given preliminary approval to American Express Co. and CIT Group to receive support from the $700 billion bailout fund.

In related moves, shareholders approved two acquisitions that were forced by banks' massive credit losses.

PNC Financial Services Group Inc. and National City Corp. shareholders approved PNC's acquisition of the Cleveland-based bank. The deal is expected to be complete by late 2009.

And Wells Fargo & Co. and Wachovia Corp. shareholders approved Wells Fargo's $11.8 billion purchase of Wachovia.

[payasyougo]

"...GIVE PEOPLE JOBS..."
----
Actually, in an unencumbered capitalist society where the tax structure is not restrictive and the government does not try and manipulate demand, jobs are created due to demand and people compete for them. Giving people jobs creates a welfare society with a growing government that eventually collapses.

Exactly what is the exit strategy for all this government stimulus and debt? If your answer is "we''ll deal with that later, right now we need to put people to work" then you have defined and deferred today''s problem.

[glenn_lewis]

AS AN ECONOMIST, I CAN TELL YOU THAT A POLICY OF EASY TERMS TO BANKS WAS TRIED IN THE GREAT DEPRESSION WITH NO SUCCESS. THE ONLY STIMULATION THAT REALLY WORKS IS FISCAL; I.E. GIVE PEOPLE JOBS SO THEY HAVE THE INCOME TO BUY THE CARS AND OTHER GOODS THAT ARE NOT CURRENTLY SELLING.

[dronemonk]

In a democracy, the people generally tend to get the government they deserve. Just look at all the crazy people here... I mean, just lookit em all. Small wonder our nation has hit the skids, what with a pig ignorant base of citizenry like this.

[element51]

ghostfighter....Basically you make good sense. Right now, our financial system is like a plugged up toilet. The ***** is in there, we just can''t get it out. Sooner or later things will have to start to flow again but the question is, when? And as I said in my previous post, even if a person is quallified for and can pay a mortgage payment there is that fear that their job will disappear and the jobs that are out there are not good paying jobs. And I don''t care what Rowdy says, there are millions of us dems out here who have worked and saved and are responsible for ourselves. I have worked since I was 15 years old and my parents taught me the value of a dollar and how to plan for the future. Go back to the early 80''s and read the history. If you make any effort at all you can see exaxctly what happened to bring us to where we are now. Let''s put all this behind us and lend our support to Obama just as I supported Bush when he took office. He failed but maybe Obama can be a strong leader and get some things done. At least give him some time to fail before you throw him to the dogs.

[element51]

I really get sick of you clowns on here who keep ranting that everyone is asking the government for everything. My son is 27 and he and his wife have been saving for 8 years to buy their first home. They finally have enough for all the fees and a healthy down payment and guess what. He just lost his job. It moved to Mexico. So now they have the down payment but can''t buy because there are no jobs for him to go to. He is a certified welder and there are no jobs in that field. In a way he was lucky that he got whacked before they bought. Otherwise they would not have been able to make the payments and would have lost their down payment money. He told me that even if he finds another job that he is afraid to buy a house for fear that his job will be outsourced. The Great Rowdy in her infinite wisdom says his age group is just a bunch of losers who worship Obama. Not so Great One. From her posts it looks like she is ready to go postal. I have seen some hate on these boards but nothing comes even close to her angry bitter postings. I truly hope that there are not very many like her out there. She is just downright frightening. At this point I don''t give a dam who solves our many problems. Bring in Alfred E. Newman if he can get it done. We need some leadership and I believe that Obama can be the leader we need. I hope so for the sake of the country.

[be_real]

laying off people is not helping... companies should hold workers at longest they can, even if they are loosing money

[bambergbier]

I laugh at the whining little girls on this site. The truth is that mortgage applications have now reached their highest level in 5 years. The housing boom will be as simple as turning on a faucet. Which is what the government will do in January. Notice the stock market''''s not really tanking any further? That''''s why. Grow up and quit crying.

Posted by ghostfighter at 09:59 AM : Dec 24, 2008

Applications don''t mean JACK! The faucet you speak of is rusted shut.

[irmcvet971]

CBS is doing nothing but spinning the economic news and data to panic Americans and make things seem worse than they really are.

Lets see if the spin gets positive after Jesus Obama descends from the clouds in January.

It is no wonder the newspapers and network tv are losing readers and viewers. Mark Twain wrote much better fiction.

The Messiah''''s transition team has requested 7 fish and 3 loaves of bread to feed the multitude that will be in attendance at the inauguration. Water will be turned into a vintage wine for those of drinking age.


Posted by assemblyofso at 09:05 AM : Dec 24, 2008

I don''t know of anyone who thinks of our new President in this way... YES a lot of us have great hope for him. YES a lot of us believe he can and will get us out of this massive hole we allowed you fascist to lead us into but we still think of him as a Man, young, intelligent and SO VERY much better than what we have!!

[irmcvet971]

What''''s keeping you here, then?

Posted by easeup at 09:04 AM : Dec 24, 200

BECAUSE IT''S HIS country you poor simple minded loser! You bootlickers think that just because we bought into the Reich Wing Lies and it blew up in our face, we can''t state the obvious!! Disgusting lot... these fascist!!

[irmcvet971]

CBS is doing nothing but spinning the economic news and data to panic Americans and make things seem worse than they really are.

Posted by assemblyofso at 09:05 AM : Dec 24, 2008

I couldn''''t agree more--CBS seems like they''''re trying extra hard today to spread doom & gloom.

On Christmas Eve no less....

Posted by easeup at 09:08 AM : Dec 24, 2008

Ummmm So IF it''s not reported the people will not know it? ROFLMAO Man you fascist are getting so desperate it''s almost funny! You don''t need the News Media to tell you this!! Now crawl back under you rocks and we''ll let you know when we dug out of the Fascist Economy, YET AGAIN!!

[trillion1]

Yes, put on those rose colored glasses the rightwing wears. No one I know needs the media to tell them how the economy is doing. They look in their wallets.

[assemblyofso]

CBS is doing nothing but spinning the economic news and data to panic Americans and make things seem worse than they really are.

Lets see if the spin gets positive after Jesus Obama descends from the clouds in January.

It is no wonder the newspapers and network tv are losing readers and viewers. Mark Twain wrote much better fiction.

The Messiah''s transition team has requested 7 fish and 3 loaves of bread to feed the multitude that will be in attendance at the inauguration. Water will be turned into a vintage wine for those of drinking age.

[used2bfedup1]

Can u imagine if all that money that went to the BS war in IRAQ went to this country, infrastructure and economic development???

And we wouldnt have been any farther behind in the middle east.

[smurfcrusher]

"The Bush administration warned that the country should be prepared for worse news to come.

"The fourth quarter, because of the credit crisis, the standstill in credit as markets froze up and the financial market turmoil, will be significantly weaker," presidential spokesman Tony Fratto told reporters at the White House on Tuesday. "


Yet another Bush victory.

[hologram5]

Generation X''''s want everything handed to them on a silver plater. Us Baby Boomers have worked hard all of our lives to try to get ahead. I have seen these x''''s work. If that is what you want to call it. Our 401''''K''''s have taken a big hit. And how in the hell do you think we had a 401 in the first place? We worked hard and saved like our parents taught us. But no to you x''''s, you think the world owes you. You x''''s need to learn by our example. We worked for every thing we have and nothing was just handed to us.


--------------------------------------------------------------------------------

Posted by MIpapaof4 at 07:37 AM : Dec 24, 2008
--------------------------------------
I firmly disagree with you, I am genx and do not have anything handed to me, I grew up on pancakes and have been working for a living since I was sixteen years old. I work for everything my family and I have. My only wish is that my family has it better than I did but it doesn''t look like that will happen.

[irmcvet971]

We will never solve Americas problems - if we don''''t learn how to hold people accountable for their actions. Everytime these politicions waste our money we do nothing. They can rob us blind and we will do nothing!!!

Posted by scienceman1 at 03:43 AM : Dec 24, 2008

Ahh! Did you just miss an ELECTION sparky? You know the one where we threw Republican''s, the party that gave us this mess, out in record numbers? Did you miss the part where we elected a NEW leader who wants to take us away from the Failures of "Trickle Down" and MASSIVE debt? Sorry you missed it! Stay tuned though, more to come.

[irmcvet971]

Generation X''''s want everything handed to them on a silver plater. Us Baby Boomers have worked hard all of our lives to try to get ahead. I have seen these x''''s work. If that is what you want to call it. Our 401''''K''''s have taken a big hit. And how in the hell do you think we had a 401 in the first place? We worked hard and saved like our parents taught us. But no to you x''''s, you think the world owes you. You x''''s need to learn by our example. We worked for every thing we have and nothing was just handed to us.

Posted by MIpapaof4 at 07:37 AM : Dec 24, 2008

So you are saying this is ALL the fault of OTHER American''s? We''re not going to blame the Republican Party who, for decades, made it their mission to remove EVERY single regulation put in place to PROTECT the American People? We have NO blame for an ADMINISTRATION who took us away from an Economic Policy that was working extremely well to again try "Trickle Down"? You sound like a Republican Apologist, who will do or say ANYTHING to protect the "Party".

[MIpapaof4]

Generation X''s want everything handed to them on a silver plater. Us Baby Boomers have worked hard all of our lives to try to get ahead. I have seen these x''s work. If that is what you want to call it. Our 401''K''s have taken a big hit. And how in the hell do you think we had a 401 in the first place? We worked hard and saved like our parents taught us. But no to you x''s, you think the world owes you. You x''s need to learn by our example. We worked for every thing we have and nothing was just handed to us.

[tincup356]

to red trash...many of us Baby boomers, have worked hard all our lives and have paid into the system that was supposed to be our retirement...what happened to SSI? it was robbed many years ago by the same people who are giving our country away to lobbyists..I''m tired of hearing you young lazy generation X ''ers who are too lazy and immoral to make decent citizens *** because someone did pay into the system and did work hard for many years,,,and do deserve what was promised as a retirement...now retirement for those same baby boomers is a destination that cannot be reached gee thanks....i don''t have to worry about what to do the rest of my life....work if i want to survive,,,,right up till the last minute.

[wl7bzh]

Proverbs 6:16-17

[16]There are six things that the LORD hates, seven that are an abomination to him: [17]haughty eyes (the DECIDER), a lying tongue (935 LIES), and hands that shed innocent blood (4200 DEAD AMERICANS).



George W Bush - An abomination to the LORD!

Posted by jerr11 at 12:32 AM : Dec 24, 2008


Back up slick-you missed the one about God hating sin not the sinner.

of all the sins God hates it''s not murder, homosexuality, lust, lying, or stealing-it''s pride.

Pride keeps us from realizing that all of us have a sin nature. So, hating the sinner rather than the sin is a bum rap. Hate the sin for what it does to the person caught up in it. That includes me and you. For all have sinned..... Ya get the idea.

I need some coffee.