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Recession Is (ho-hum) Official

This story was written by Amanda McClure, The Daily Iowan

A research group on Monday confirmed University of Iowa professors' suspicions the nation has entered into a true recession.

"It's not like naming who won 'American Idol,' " said UI economics Associate Professor John Solow. "It's not hard to figure out we're in a negative economic situation. This shouldn't come as a surprise to people."

The recession announcement from the National Bureau of Economic Research comes in the wake of two consecutive quarters of a decreasing gross domestic product.

This is the first classified recession since 2001. According to the National Bureau of Economic Research, the country entered into this recession exactly one year ago, in December 2007.

Monday's announcement was met with a 680-point drop in the Dow Jones Industrial Average - the fourth-biggest single-session decline in history.

The National Bureau of Economic Research also takes social elements into consideration when determining a recession. Retail, manufacturing, and employment are all weighed.

Over the four-day Thanksgiving weekend, retailers saw a 7.2 percent increase in sales compared with last year, according to the National Retail Federation. However, the $41 billion four-day weekend could mean consumers won't spend as much throughout the holiday season.

"The fact that we saw record numbers on Black Friday says that shoppers were still out in full force, and it was largely because of the abundant sales," UI economics student Dave Drustrup said. "Because of that influx of activity, the next month could take a big hit."

Meanwhile, the auto industry's second trip to Congress is expected to be better than the first. GM, Ford, and Chrysler must submit proposals today for how they will use a $25 billion bailout.

Unemployment rose to 6.5 percent across the nation in October, leaving 10.1 million Americans without jobs, according to the U.S. Bureau of Labor.

"It doesn't matter who announces it - consumers are already concerned with rising unemployment, and bailout packages, the fact that it's finally considered a recession won't have a huge impact on them," Solow said.

Beth Ingram, the associate dean for undergraduate programs in the UI Tippie College of Business, acknowledged the effect of the stock market plunge but said unless people are trading on a daily basis, the fluctuation of the market doesn't have as severe of an effect.

"What it does is make people nervous, but it doesn't necessarily change their consumer patterns," she said.

Solow said the reaction from the stock market isn't necessarily a reflection of consumers, but rather firms and investors who are able to control the market movement.

There was little reaction Monday from investors and policymakers, who have been working to revive the economy. The drastic fluctuation in stock prices are familiar sights for many traders and officials - reactions, overall, were placid.

"Most policymakers have been anticipating this for weeks now, meaning we're not going to see an immediate change in the way things are moving," Ingram said.

Solow agreed.

"What it means is that they finally said, 'Yeah, OK, our economy is hurting,' " he said. "Unfortunately, this isn't the sort of thing where an official announcement is going to change anything about the situation."

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