The following is from the Jan. 28, 2008, edition of Wired Magazine. Professor Mike Davis of SMU's Cox School of Business provided expertise for this story.
By Betsy Schiffman
The headlines in recent months bear a startling resemblance to those from early 2001: layoffs by the thousands, sickly financial outlooks and weak consumer spending. If the U.S. economy slips into a full-blown recession, tech companies could get hammered as consumer spending and IT spending abruptly grind to a halt, according to economists and analysts. . .
A recession couldn't come at a worse time for the tech sector, given that many pockets of the technology industry only recently recovered from the last recession. If (or when) the recession comes, mergers and acquisitions activity will likely grind to a halt, and ad-based web businesses will take a serious hit. The recession isn't a sure thing yet, though, and some economists say it's debatable whether it will even happen.
"I'm not entirely convinced we're going to hit a recession," says Mike Davis, an economist and professor at the Southern Methodist University Cox School of Business. "A slowdown, for sure. And there are reasons to be concerned, but should we be really, really concerned? I don't know."
The Federal Reserve Board seems to think so. On Tuesday it approved an emergency cut to a key interest rate, citing "weakening of the economic outlook and increasing downside risks to growth." The Fed lowered the federal funds rate by a fairly extreme 75 basis points a week ahead of a scheduled meeting.
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