The denial stage has almost passed. Acceptance that the US has entered a recession is spreading. The question now is: what kind of recession?

The peculiar nature of the upswing just gone provides clues. In short, Americans’ shopping habits raced far ahead of their wage packets. By 2006, real median family income had not caught up with the level reached in 2000, according to the US Census Bureau. With growth in 2007 probably minimal, that means the average American family is going into this recession with less income than it enjoyed prior to the past downturn. The only other time that happened – in 1981 – was in the middle of a double-dip recession. Labour data tell a similar story. Taking December 2007 as a hypothetical peak, non-farm payrolls rose, on a net basis, by 7m, or just 5.5 per cent, since the end of the past downturn. In each of the previous two recoveries, employment expanded by one-fifth or more.