The economic and financial market outlook for the US is gloomy.

The economic and financial market outlook for the US is gloomy. A recession not only seems inevitable, the evidence suggests a cyclical economic downturn has most likely already begun.The number of economic sectors involved in the economic contraction is rapidly broadening. This past week the widely respected Institute of Supply Management non-manufacturing index, an indication of the US services sector, declined very sharply in January to not only the lowest level since October 2001 but to a recessionary level. This augments the significant contraction already underway in manufacturing and just the latest report adding to the evidence of recession. Perhaps the most telling aspect of the January employment report was the largely overlooked aggregate hours worked, which indicates a probable decline in first quarter 2008 real GDP. This should come as no surprise with the widening credit crunch affecting not only real estate, but finance, business, state and local governments and consumers. The state of consumer finances appears to be rapidly deteriorating judging by the rising rate of credit card delinquencies and defaults as well as home mortgage foreclosures. A further indication of the strained state of consumer finances was embodied in the Wal-Mart explanation for missing its performance targets. Wal-Mart noted that its customers were spending their gift cards on food rather than on discretionary consumers goods. The hesitancy of most economists to adequately recognize the developing recession typically rests on the thus far only moderate declines in employment, as well as the strength of inflation and the global economy. But, this misses the lagging nature of these variables. As the recession unfolds, employment will worsen, the global economy will slow, eventually dampening inflation. These prospects will not be prevented by continuing Fed easing and the fiscal stimulus. The corporate profit picture will darken materially, leading to further declines in equity prices. Stay tuned for further comments. Phil Braverman

Philip Braverman, President of Braverman Consulting has had a long and distinguished career on Wall Street. He was Chief Economist of Chase Manhattan Bank Securities, Chief Economist and Executive Director of Irving Bank Securities and Bank of New York Securities and was most recently Chief Economist of DKB Securities, now part of the Mizuho Group. In assessing Mr. Braverman's performance as an interest rate forecaster and that of other so called interest rate gurus, Financial World called him "the best of the lot." Barron's characterized his forecasting track record as "uncannily accurate." The Wall Street Journal referred to him as an accurate foreign exchange forecaster and Telerate said "he has for long correctly predicted interest rates and Fed moves."