Is A Recession Around the Corner?

The economic clouds continue to darken.

The unemployment rate surged to 5 percent in December as the economy added a meager 18,000 jobs, the smallest monthly increase in four years, the Labor Department reported on Friday.

Economists viewed the report as the most powerful indication to date that the United States could well be falling into a recessionary downturn. Evidence of widening unemployment heightened anticipation that the Federal Reserve would further cut interest rates this month, perhaps by an unusually large half a percentage point, in a bid to prevent the economy from sliding into the muck.

“This is unambiguously negative,” said Mark Zandi, chief economist at Moody’s Economy.com. “The economy is on the edge of recession, if we’re not already engulfed in one.”

A recession is typically defined as an extended period of at least several months during which economic activity shrinks and unemployment rises.

The swift deterioration in the job market resonated as a warning sign that troubles once confined to real estate and construction are spilling into the broader economy, threatening the ability of American consumers to keep spending with customary abandon.

On Wall Street, the report led to a big sell-off that sent the Dow Jones industrial average plunging nearly 2 percent.