Wall Street cries "recession" but data says slowdown

By Emily Kaiser - Analysis

WASHINGTON (Reuters) - Panicky Wall Street may have already accepted that the U.S. economy is in recession but the economic data has yet to confirm that gloomy assessment.

If the U.S. economy can survive the next couple of months with no fresh shocks, it may avoid the bruising two-year downturn that some are predicting, though it may still feel a lot like a recession as employment and spending stall.

Thursday's report on business activity from the Philadelphia Federal Reserve Bank was the latest indication that the U.S. economy was slowing but not yet collapsing.

Should that trend continue through the second quarter, there is a chance that the economy could skirt the traditional definition of recession -- two quarters of negative readings on gross domestic product.

That just might buy enough time for Federal Reserve interest rate cuts and a $152 billion (76.6 billion pound) 2008 fiscal stimulus plan to take hold. It certainly would not be strong growth, but it may not be as grim as many investors now fear.

Analysts from firms including Merrill Lynch, Goldman Sachs and JP Morgan have concluded that the U.S. economy has likely slipped into recession. For many, the nail in the coffin was an unexpected steep drop in employment in February.

It may end up being largely a matter of semantics.

"Nobody can say for sure whether the outcome is going to be just north or south of zero, and the point is also that it doesn't matter -- this is going to feel bad anyway," said Jorgen Elmeskov, chief economist at the Organization for Economic Cooperation and Development.