1. January 2008 Macro Headlines

2. Goldman Sees Recession This Year (WSJ 1/9) The recent economic data has not been pretty, and the recent jump in the unemployment rate has pushed Goldman Sachs to forecast a recession this year with the Fed responding with major cuts to the fed funds rate. However, they say the recession shouldn’t last more than three quarters and should be relatively mild. Goldman is optimistic because they expect the Federal Reserve to cut the fed funds rate to 2.5% by the end of the year from the current 4.25%. They also expect a government package of fiscal stimulus and continued strong exports offsetting the weakness.

3. Bifurcated Job Growth (WSJ 1/9) The slowing in employment growth in the last 12 months reflects two starkly different trends. Sectors close to the credit crunch are shedding jobs rapidly while sectors further from it are growing a normal pace “Financial activities, retail trade and construction account for about 22% of total employment, and have already been contracting,” the firm says. “Meanwhile, education, health and leisure job growth (35% of total payrolls) has continued at a 2.5% annual rate.” Bank Credit Analyst predicts a “broad-based contraction in employment growth” will be avoided, but “the Fed cannot afford to wait to see if the weak economic sectors take down the overall economy.”

4. Bush Looks to Reprise Tax-Relief Measures (WSJ 1/9) Faced with recession fears, the White House is considering tax rebates for individuals to encourage spending and tax breaks for businesses to encourage investment, according to people familiar with the matter. Options include a $500 tax rebate for individuals and tax breaks for businesses for equipment investments.

5. Recession S.O.S. - goosing growth (CNNMoney 1/10) Experts affiliated with both parties have called for some form of stimulus. In addition to rebates, ideas being batted about range from making the president's tax cuts permanent to giving businesses greater tax breaks to boosting government spending in ways that create jobs or provide more money for the unemployed. Some Washington observers are saying only the Federal Reserve has any real chance of steering the economy away from recession and that any moves from lawmakers would be only for the sake of politics in an election year.only the Federal Reserve "We're suspicious of stimulus packages because a lot of the time by the time Congress acts it's too late to have an effect on a recession," said Josh Gordon, senior policy analyst at the Concord Coalition, a bipartisan deficit watchdog group.

6. The Fed to The Rescue (CNNMoney 1/10) Federal Reserve Chairman Ben Bernanke said in a speech Thursday that the central bank is prepared to continue lowering interest rates in order to help keep the economy on track. He also reiterated that the Fed does not believe the economy will slip into a recession this year.

7. Trade deficit widest in 14 months (CNN Money 1/10) The U.S. trade deficit in November surged to the highest level in 14 months, reflecting record imports of foreign oil. Through the first 11 months of 2007, the deficit is running at an annual rate of $709.1 billion, down 6.5 percent from last year's all-time high of $758.5 billion. Analysts believe that the export boom will finally result in a drop in the trade deficit in 2007 after it set consecutive records for five years.