NEW YORK – If there were any doubts that the United States is in the middle of a recession, Thursday's batch of grim data removed them — and virtually ensured another interest rate cut by the Fed in two weeks' time.
According to a series of government reports released Thursday, home sales and orders to factories for big-ticket items plunged in September, and the number of Americans drawing unemployment benefits now stands at an 18-year-high — the strongest evidence to date that the country has entered a recession.
"The bad news just keeps on coming," said Melani Jani, an economist at Salomon Smith Barney in New York. "The economy was already weak before Sept. 11, and these figures show the deterioration has become much more intense."
Analysts said the reports hardened the conviction that the already weak U.S. economy had slid into a recession following the attacks on Sept. 11 and strengthened expectations that the Federal Reserve will cut interest rates for the 10th time this year when it meets on Nov. 6.
A recession is traditionally defined as two consecutive quarters of declining economic output. The gross domestic product grew at a barely discernible annual rate of 0.3 percent in the April-June quarter.
Many analysts believe when the GDP figure for July-September quarter is released Wednesday, it will show GDP falling at a rate of around 1 percent with the decline expected to accelerate to a 2 percent drop in the current quarter.
A Dreadful Set of Numbers
The Commerce Department reported Thursday that orders to factories for big-ticket durable goods fell for a fourth consecutive month in September, a decline of 8.5 percent that was six times larger than economists expected. It pushed orders for durable goods down to $165.4 billion, the lowest level since August 1996.
Sales of existing homes, one of the economy's few bright spots, fell by 11.7 percent, the biggest one-month drop in six years, the National Association of Realtors reported. The association said the shock of the terrorist attacks caused housing sales, along with a lot of other economic activity, to come to a standstill.
The Labor Department said the number of newly laid-off workers filing for unemployment benefits rose to 504,000 last week, a level usually associated with recessions, while the total number of unemployed collecting benefits rose to an 18-year-high of 3.65 million people, 66 percent above the level of a year ago.
"These numbers leave no doubt that we are in a recession," said Michael Evans, chief economist at American Economics Group, a Washington-based consulting firm.
A final report showed that Americans' wages and benefits rose by 4.1 percent in the 12 months ending in September, compared to a 4.3 percent increase for the previous 12 months. Analysts said that figure will decline even more sharply in coming months as rising layoffs further depress employees' bargaining power.
Forecasts Revised Down
While economists had been expecting a rebound early next year, many said they are revising those forecasts down, in part because of the new uncertainties raised by threats of anthrax and other bioterror attacks.
"Clearly, anything that hits consumer confidence is bad for the economy. The real question is how bad will it be," said David Wyss, chief economist at Standard & Poor's Co. in New York. "With all of the developments on the terrorist front, our crystal balls have gotten cracked."
The Bush administration is pressing to get a stimulus package through Congress to help the shaky economy. The House of Representatives on Wednesday narrowly approved a Republican-backed plan that would inject $100 billion into the economy over the next year.
Fed Chairman Alan Greenspan is keeping a close eye on durable goods orders and employment data as gauges of the economy's health following the attacks, according to lawmakers who met with the central bank chief last month.
Thursday's data were released less than two weeks before the Fed is scheduled to meet to discuss interest rates on Nov. 6. The Fed has cut rates nine times this year, twice since Sept. 11, to their lowest level in nearly four decades.
With inflation apparently in check for now, the Fed is seen as having plenty of room to cut rates again to prop up the economy — and that may be the best chance the country has of rebounding for now.
Reuters and the Associated Press contributed to this report.