"The risk is that the profits recession becomes a recession for consumers and therefore a recession for the entire economy," said Edward Yardeni, chief investment strategist for Deutsche Banc Alex. Brown.
The chances that a slowdown will become a recession still hang in the balance.
That is the prospect being described by economists who have predicted that this slump will become a recession.
Meanwhile, slower economic growth, which could become a recession, is likely to lead to an increase in bad loans, which will further weaken lenders.
The National Bureau of Economic Research, the official arbiter of business cycles, said in November that the downturn began last March but might not have become a recession without the attacks.
So far, notwithstanding weaker manufacturing, as reported the day before, there has been no clear sign from the real economy that the slowdown will in fact become a recession.
Along with her husband, fellow Berkeley economist David Romer, she holds a post on the independent panel that decides when to formally rule that a downturn has become a recession – experience that will surely come in handy next year.
Forbes: So David, in October 2007, you said it was entirely possibly the economic slowdown could become a recession.
Wade F. Horn, assistant United States secretary of health and human services in charge of welfare policy, said that the current welfare program had become relatively "recession-proof".
Consultants say those swings in demand mean that over the long term, their business has become "relatively recession-proof," Mr. Walker of McKinsey said.
