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U.S. corporations in recession, report says

December 3, 2007

Companies are reporting declining profits and sales, which indicates they are in a recession, and the entire economy may follow suit, according to Bloomberg.

Profit generated by American companies fell at an annual rate of $19.3 billion in the third quarter, said the report, which cited Commerce Department figures.

Profit for companies in the Standard & Poor's 500 index dropped nearly 25 percent on a per-share basis in the third quarter-the largest year-over-year decline in nearly five years. Earnings could fall as much as 30 percent this quarter.

As sales fall and energy and labor costs rise, companies are spending less and hiring fewer workers. Those moves could increase the risk that an economy already weakened by the housing slump will worsen in the fourth quarter.

While declining profits alone wouldn't necessarily signal a recession for the country, the fact that many of the companies hurt are in the financial sector has analysts more worried.

A drop in the financial sector could hurt the economy more as banks and other institutions cut payroll, capital spending and tighten lending criteria.

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