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By Barry Wood
01 December 2008
Stock prices plummeted in New York on Monday. And a recession was declared as of a year ago. VOA's Barry Wood has more.
On Wall Street, it was the fourth biggest daily point decline on record. Amid mounting pessimism about a decelerating global economy, the Dow Jones Industrials lost 680 points to close at 8,149. All 30 stocks in the Dow index were down, with financials and technology stocks being hardest hit. The decline wiped out half of the gains posted in last week. Stocks have fallen more than 40 percent from their record highs set in October 2007.
|Traders work on the floor of the New York Stock Exchange, 01 Dec. 2008|
A committee of the National Bureau of Economic Research declared that the U.S. economy fell into recession last December.
"When we're looking at dating a recession, we're looking primarily at measures of economic activity," said James Poterba, chairman of the Bureau. "That means production, employment, the level of gross domestic product and income measures. We focus on everything measured in constant dollars."
While not a government agency, the NBER is considered the official arbiter of dating U.S. recessions. It does not predict how long recessions or economic downturns will last. But this recession has surpassed the ten-month average length of recessions in the post-World War II period. The last U.S. recession, in 2001, was relatively short and mild.
Ben Bernanke, the Chairman of the Federal Reserve Board - the nation's central bank - was asked Monday about the parallels between the current economic downturn and the Great Depression of the 1930s.
|Ben Bernanke (file)|
"There is no comparison. There is an order of magnitude difference between being in the slow-down and financial distress we're experiencing in this economy and what happened in the 1930s," he said. "In the 1930s, there was a worldwide depression that lasted about 12 years and was only ended by a world war. During that time, the unemployment rate went to 25 percent, at least, based on the data we have. The real gross domestic product fell by one-third. About a third of all the banks failed. The stock market fell by 90 percent."
Despite Monday's recession announcement, Bernanke said it would be difficult to cut key interest rates much more to boost the economy.
Meanwhile, the price of oil fell by more than $5 to a little more than $49 a barrel. Gold fell $42 to $777 an ounce.