RECESSION OFFICIAL

NEW YORK (CNNMoney.com) -- The National Bureau of Economic Research said Monday that the U.S. has been in a recession since December 2007, making official what most Americans have already believed about the state of the economy .

The NBER is a private group of leading economists charged with dating the start and end of economic downturns. It typically takes a long time after the start of a recession to declare its start because of the need to look at final readings of various economic measures.

The NBER said that the deterioration in the labor market throughout 2008 was one key reason why it decided to state that the recession began last year.

Employers have trimmed payrolls by 1.2 million jobs in the first 10 months of this year. On Friday, economists are predicting the government will report a loss of another 325,000 jobs for November.

The NBER also looks at real personal income, industrial production as well as wholesale and retail sales. All those measures reached a peak between November 2007 and June 2008, the NBER said.

In addition, the NBER also considers the gross domestic product, which is the reading most typically associated with a recession in the general public.

Many people erroneously believe that a recession is defined by two consecutive quarters of economic activity declining. That has yet to take place during this recession.

This downturn longer than most

The NBER did not give any reasons or causes of the recession. But it is widely accepted that the housing downturn, which started in 2006, is a primary cause of the broader economic malaise.

The fall of housing prices from peak levels reached earlier this decade cut deeply into home building and home purchases. This also caused a sharp rise in mortgage foreclosures, which in turn resulted in losses of hundreds of billions of dollars among the nation's leading banks and a tightening of credit.

The current recession is one of the longest downturns since the Great Depression of the 1930's.

The last two recessions (1990-1991 and 2001) lasted eight months each, and only two of the 10 previous post-Depression downturns lasted as long as a full year, according to the NBER.

In a statement, White House Deputy Press Secretary Tony Fratto said that even though the recession is now official, it is more important to focus on the steps being taken to fix the economy.

"The most important things we can do for the economy right now are to return the financial and credit markets to normal, and to continue to make progress in housing, and that's where we'll continue to focus," he said. "Addressing these areas will do the most right now to return the economy to growth and job creation."

President-elect Obama's transition team did not have an immediate comment on the recession announcement. But other top Democrats said this is further proof of the need for another economic stimulus package, which Obama has advocated.
"With rising costs of living, rising unemployment, record foreclosures and depleted savings, we must do more to help families make ends meet," said Senate Majority Leader Harry Reid in a statement. "With the cooperation of our Republican colleagues, we intend to send a plan to the White House as soon as possible following President-elect Obama's inauguration next month."

How long will it go?

Nonetheless, several economists said the real concern is that there is no end in sight for the downturn.

Some suggested that the best case scenario for the economy is that it would reach bottom in the second quarter of 2009. And even if that happens, that would still make this recession the longest since the Great Depression.

Rich Yamarone, director of economic research at Argus Research, said the only good news for the economy is that some of the steps already taken by the government earlier this year could start to spur growth soon. For example, he said interest rate cuts by the Federal Reserve, which started in September 2007, "should be working their magic any day now."

In February, Congress passed a $170 billion tax rebate meant to stimulate the economy. But that only boosted GDP during the second quarter.

The financial market and credit crisis worsened during this summer, prompting Congress, the Treasury Department and the Fed to pump trillions of dollars into the economy through a variety of programs, including a $700 billion bailout of banks and Wall Street firms and hundreds of billions of lending by the Fed to major companies and lenders.

But Lakshman Achuthan, managing director of Economic Cycle Research Institute, said that at this point, the only solution for the recession is time.

"All the hand waving and real cash that policymakers are throwing at the problem won't change the fact we're stuck in this nasty recession," he said. "The ultimate cure of a recession is letting it run its course."

Achuthan's research firm tracks weekly leading economic indicators that are supposed to signal a change in direction for the economy four or five months ahead of time. Those indicators are continuing to fall at a record pace.
Still, he said he's not worried about the current recession turning into a depression, as many Americans fear.3

"Even with indicators in a tailspin, this still is only a very severe recession," he said. "There's lots of gloom, but we don't see doom."

By Chris Isidore, CNNMoney.com senior writer
Last Updated: December 1, 2008: 3:27 PM ET

see disclaimer below

What the Bailout Means to You

What the Bailout Means to You

The Emergency Economic Stabilization Act, referred to by some as the "bailout bill," or, as others prefer to call it, the "rescue plan," was recently enacted in an attempt to stabilize the turmoil in the U.S. economy. The Act allows the Treasury to buy "bad paper"--mortgages and mortgage-backed securities--from banks and financial institutions. According to Treasury Secretary Henry M. Paulson, Jr., the federal government believes this "bad paper" is part of the root cause of the chaos both on Wall Street and on Main Street. Money has stopped flowing because banks and financial institutions holding defaulting mortgages (due to a housing correction) have stopped lending, and investors (due to a lack of confidence) have been reluctant to commit capital to financial institutions. The hope is that by relieving banks and financial institutions of the burden of carrying this "bad paper," money will begin to flow again. What the actual result of the bailout will be on Wall Street remains to be seen, and there is no telling what the future might hold, but here are some results the average American is likely to see.

Cash in the bank will be better protected

The Act temporarily increases the FDIC and National Credit Union Share Insurance Fund deposit insurance limits from $100,000 per account to $250,000 through December 31, 2009. This will protect more of your money that is held in an FDIC-insured bank or savings association if that bank or association should fail.

Since accounts at different banks are insured separately, the easiest way to increase your coverage is to simply keep less than $250,000 at any one bank. You could have $250,000 each at 500 different banks, and be insured for $125 million in total. You may also qualify for more than $250,000 in coverage at one insured bank if you own deposit accounts in different ownership categories. For more information on this, go to the FDIC website at www.fdic.gov, or contact your financial professional.

Note: Through December 31, 2009, there is no FDIC coverage limit on non-interest bearing transaction deposit accounts, and the insurance amount on certain retirement accounts remains fixed at $250,000 per depositor per bank, even after December 31, 2009.

Mortgages, loans, and credit should become more available

Since many banks and financial institutions began putting the brakes on lending, many small businesses and consumers with lower credit scores have found it difficult, if not impossible, to get mortgages, car loans, credit cards, or other financing. The federal government expects the infusion of capital into banks and financial institutions will ease the credit drought, making mortgages, loans, and credit more available to home buyers, employers, and other borrowers.

Understand, however, that the increased ability to borrow and purchase by itself won't reduce the excess housing inventory, put an end to foreclosures, increase the value of homes on the market, or put builders to work again. Nor will it help consumers with their credit card debt or delinquency. Many expect banks and credit card companies to implement stricter standards, such as lowering credit limits and increasing fees. Borrowers with good credit and adequate collateral, though, should be able to continue borrowing with little problem.

Unemployment may stabilize

Though the bailout itself will not create jobs, the government hopes that the fact that employers will have more credit available to them will help stem the tide of unemployment. However, the government warns that with consumer spending down, inflation, and other stresses on businesses, it's unlikely that the job market will improve in the short run, and may even get worse before it gets better.

-see disclaimer below-

Supreme Court Decision Regarding Muni Bond Tax Exemption

Supreme Court Okays Same-State Muni Bond Tax Exemption

States may continue to exempt their residents from paying taxes on that state's municipal bonds, according to a recent ruling by the U.S. Supreme Court. The decision overturns a lower court decision involving the state of Kentucky. If it had been allowed to stand, the lower court decision would have had a substantial impact on muni bond investors, particularly those who own single-state mutual funds designed to provide a double tax advantage to residents of a particular state. The Supreme Court ruled that such in-state tax exemptions play an important role in helping states fund public projects.

Clarifying the tax status of state municipal bonds for local residents removes an issue that, coupled with the general credit crunch, had been weighing on the market for municipal bonds. For a copy of the ruling in Department of Revenue of Kentucky et al. v. Davis, click here.

As indicated below, this is not intended to provide tax or legal advise. Please consult with your tax or legal professional if you have specific questions regard a tax or legal matter. This information has been provided for informational purposes only and should not be taken as an offer or solicitation of an offer about a specific investment. Before deciding on the merits of any investment, you should obtain the applicable prospectuses and/or the program documents and description. As with all investments, you should read all materials, have a through understanding of the investment (including its risks and investment objectives) before investing or sending money.

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