Wall Street Sneezes; Heartland Catches Cold

The high-profile economic woes plaguing Wall Street and previously hot housing markets are spreading, raising the possibility of the worst recession Americans have faced in years. The New York Times crisscrosses the country, assembling anecdotal evidence—suddenly thrifty brides, unsold construction equipment, sinking earnings at FedEx—that suggests the slowdown could drag into 2009.

Especially worrisome are projections that show consumer spending dropping 1% drop in the first quarter. "That's a wow," says one economist. "Outright declines for real consumer purchases are unusual." Weighing a 6% drop in fourth-quarter home sales, more than 127,000 jobs lost since Jan. 1, and a steep drop in consumer confidence, “it’s not hard to construct very dark scenarios, primarily because the financial system is in disarray,” said another analyst. (More economy stories.)