Recession street sign
Recession street sign - 
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Jeremy Hobson: Now let's get to our special coverage, "Breakdown: Our Economy. One Step At a Time." Chris Low is chief economist with FTN Financial. He's with us live from New York as he is every Friday. Hi Chris.

Chris Low: Hi.

Hobson: Well, what a week it has been. What happened?

Low: Well, aside from growing quite a bit more gray hair, what happened was this: we were doing just fine through the first half of the week -- stock market beginning to recover, optimism beginning to come back. And then yesterday the Philly Fed index was just dismal. Plunging to minus 30, a level last seen in the first quarter of 2009, which of course was right in the heart of the recession. And it just sent a wave of panic through the stock market. I think though, its important when you look at this to realize we're talking about a regional indicator. It is one that has sent false recession signals in the past. And we did have data earlier in the week suggesting the economy is not in such rotten shape.

Hobson: Chris, if we are heading back into another recession, what kind of shape are we in to do that?

Low: Well, I think that is maybe the most relevant question, because if you're going into a recession the question is, "How bad is it? Is it going to going to be a replay of '08 and '09?" And that I think is the big fear in the stock market. I would argue it is not. What determines how bad a recession is is the level of credit in the economy. In 2008, we had record levels of debt in the household sector. The banking sector was levered up to its ears. Neither one of those things is true today. In fact, households have been paying down debt for four years straight and continue to do so today. So we're in much better financial condition in the private sector than we were. I would think if it's a recession, it's a relatively mild one.

Hobson: Chris Low, chief economist with FTN Financial. Thanks Chris.

Low: You're welcome.