As the global credit crunch enters a new phase the US Department of Labor released figures on Friday showing a further monthly fall in US employment on top of a loss of 22,000 jobs in January and sealed the question of whether America’s slump has evolved into recession.

Paul Ashworth, senior US economist at Capital Economics said, “The debate is over, the 63,000 decline ….. is near-conclusive proof that the economy is now in recession.”

And Martin Feldstein, head of the National Bureau of Economic Research the body that is regarded as the official arbiter of whether America has entered a recession, said “On the basis of the available evidence, I would say we are in recession.”

On Friday, Larry Summers, the former US Treasury secretary, addressing an annual economics summit organised by Stanford University said the economy is “currently in recession” and warned that it was likely to be severe in its length and depth and he warned that official estimates of the cost of the housing and mortgage bust, put at £199 billion, were likely to be “substantially optimistic”.

Ethan Harris, chief economist at Lehman Brothers, said: “We look for modestly negative GDP growth in both the first and second quarters of 2008. Two quarters is the definition of a recession and it is likely to be a bigger, but more gradual, shock to the economy than either the 1990 or 2001 recession.”

Meanwhile Nariman Behravesh - chief economist at Global Insight - said, “All the lights are flashing red. The USA is in a recession. I don’t think there is any doubt about it at this point.”

The deepening gloom means that the US Federal Reserve is likely to cut interest rates by a further 0.75 points from the current 3% level in the next two weeks

Stephen Roach, one of the world’s leading economists at Morgan Stanley has warned that this US recession will dwarf the dotcom slump of seven years ago because the two sectors that are grinding to a halt - construction and housing dependent consumption - are six times bigger than spending on IT which triggered the last recession.

He goes on to say that the UK is probably not in the precarious position that the USA finds itself but we will not escape unscathed and we too are in for a rough year in 2008 even if it doesn't produce the two consecutive quarters of negative growth that technically define a recession.