“The probability of recession has increased pretty dramatically,” says John Silvia, chief economist at Wachovia. The first monthly fall in employment in four years has undermined one of the few remaining pillars of the economy â€“ a strong job market â€“ that policymakers thought they could rely on to support consumer spending. With that cornerstone of economic growth weakened, some on Wall Street fear the economy could be dragged into a hole by the gravitational pull of the collapsing housing market. “You are talking about a $23,000bn asset class â€“ there is nothing on the planet as big as that,” says [Merrill Lynch chief economist David] Rosenberg, who is predicting a fall in house prices nationally of up to 15 to 20 per cent. The bearish economist points out that “there has never been real estate deflation in this country that failed to end in a destabilising recession.”
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