Although it is too soon to tell whether the United States has
entered a recession, there is mounting evidence that a recession
has in fact begun. Key measures of economic activity stopped
growing in December and January or actually began to decline.
The collapse of house prices and the crisis in the credit
markets continue to depress the real economy. The sharp
reduction in the federal funds interest rate and the new fiscal
stimulus package may, of course, be enough to avert a downturn.
Many forecasters still predict that the economy will just slow
in the first part of this year and then rebound after the
summer. But the hope that monetary and fiscal policies would
prevent continued weakness by boosting consumer confidence was
derailed by the recent report that consumer confidence in
January collapsed to the lowest level since 1992. If a recession
does occur, it could last longer and be more painful than the
past several downturns because of differences in its origin and
character. The recessions that began i