Credit may tighten as jobless rate rises

Stock prices reflect future expectations about the U.S. economy, so the continuing avalanche on Wall Street signals tough times ahead.

The Dow Jones industrial average Thursday finished 39.4 percent below its high-water mark exactly one year ago, and blue-chip stocks are down more than 23 percent during the past month alone.

The steep drop amounts to a slow-motion stock-market crash, and carries all sorts of implications for ordinary Americans. The most obvious is the sinking value of retirement savings of workers who contribute to 401(k) retirement plans. Those plans are now worth on average 20 percent less than they were 15 months ago.

Lending may grow even tighter as the monthly employment numbers grow worse. A Wall Street Journal survey of 52 economists revealed late Thursday that most now consider the economy in recession.

The consensus of the economists was that the gross domestic product — the total value of goods and services produced in this country — will contract in the third and fourth quarters of this year, as well as the first quarter of 2009.

If true, it would mark the first time the GDP has contracted for three consecutive quarters in more than a half-century. According to the survey, there is an 89 percent chance of recession in the next 12 months, up from 60 percent last month.

This means the unemployment rate, now at 6.1 percent, will increase, and there already are anecdotal signs of faster work-force shrinkage.

South Florida-based Spherion, one of the nation's largest staffing companies, said its customers have cut spending and are asking the firm for fewer temporary employees.

"It's a real issue," Roy Krause, Spherion's chief executive, told The Miami Herald.