Wednesday Goldman Sachs became the latest “authority” to say that the United States may be slipping toward an outright recession, and that the housing and credit market problems would be the primary cause. In a research report Goldman Sachs 
said that the latest economic data indicate that the recession has arrived or soon will and that there will also be a decline in consumer spending, something that didn’t happen during the tech bust recession of 2001. It is clear that the housing downturn is for real.
Goldman Sachs has become the second Wall Street bank this week to declare the US economy is headed for recession this year.
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The bank’s chief US economist, Jan Hatzius, argues that the latest economic data shows 
recession has now arrived in the world’s biggest economy – or will shortly.
Hatzius, whose warning comes a day after economists at Merrill Lynch issued a US recession alert, added that the Federal Reserve will now cut interest rates from the current 4.25pc to as low as 2.5pc by the end of this year.
In a research note distributed to the bank’s clients, Mr Hatzius said real gross domestic product would contract by 1pc on an annualised basis in both the second and third quarters.
Goldman, one of the few Wall Street banks to increase profits during the credit crisis, warned 
in November that ballooning losses from the US mortgage market could force the global financial industry to scale lending back by $2 trillion.
The bank’s economists now argue the trigger point for its forecast is the fact the unemployment rate has risen by more than a third of a percentage point from the cycle trough.
“Historically, this has invariably been associated with recession, typically starting immediately and almost always within three months,” he writes.
A RECESSION has much the same pattern as the flu: starting with vague feelings of malaise and quickly building in misery until a patient’s activities are drastically curtailed. Then, all too gradually, comes an extended period of recovery, accompanied by lingering symptoms of discomfort.
With the US unemployment rate up to 4.7 per cent in September from 4.4 per cent in March, the economy is feeling a chill. Is it descending into recession?
Most economists seem to be concluding that the current unpleasantness is a false alarm. They point 
to some good vital signs: the stockmarket is up, the US dollar is cheap, the rest of the world is strong and the Federal Reserve is ready to respond.
But there are worrisome symptoms and they bear close watching. The most important is a creeping sense of malaise that could turn into a general loss of confidence. The downturn in the housing market and the repercussions in financial markets are critical factors.
There have been only two US domestic recessions in the last quarter century, both of them also global recessions. According to the business cycle dating committee of the National Bureau of Economic Research, the first began in July 1990, the second in March 2001
How the US recession will affect australia
AN INFLUENTIAL Reserve Bank board member, Warwick McKibbin, says the United States is heading for recession.
The chairman of the US Federal Reserve, Ben Bernanke, expects a smooth slowdown, but Professor McKibbin predicts a housing-induced contraction will make “the Fed’s job very difficult”.
“I think there will be a recession in the US next year because of the housing market coming off and consumers slowing down their spending,” the Australian National University economist told the Herald.
Yesterday the Bureau of Economic Analysis said US gross domestic product increased at an annual rate of 2.2 per cent in the September quarter. The figure was revised up from 1.6 per cent but remained slower than the 2.6 per cent recorded in the three months to June.
A US recession would cause global long-term interest rates to drop and encourage central banks to cut official short-term rates.
The pressure for lower rates will increase if, as Professor McKibbin believes, commodity prices are poised to fall.
