The jobless recovery morphed into the full employment recession characterized by falling credit defaults:

Global loan defaults down in 2007 but expected to rise in 2008

(Thomson Financial) Twenty issuers defaulted on 2.9 bln usd in syndicated bank loans in 2007, down from 32 issuers and 6.3 bln usd in loans in 2006, Moody’s Investors Service said in a new report. Movie Gallery Inc’s default on 900 mln usd in loans in September was the largest loan default in 2007, as well as the only loan defaulter rated by Moody’s.

“Both weaker macroeconomic fundamentals and a worsening in the ratings mix of speculative-grade issuers are the underlying factors driving the 2008 default rate forecasts,” said a Moody’s spokesman.

Doesn’t say which macro fundamentals.

Mirroring the benign credit environment for syndicated bank loans, the dollar volume of Moody’s rated corporate bond defaults also decreased in 2007, says the analyst.

In all, a total of 16 Moody’s-rated issuers defaulted on approximately 4.7 bln in debt in 2007, compared with 27 corporate issuers that defaulted on 7.8 bln usd in 2006.

Given the relatively strong historical correlation between speculative-grade bond and loan default rates, Moody’s expects that the speculative-grade U.S. loan default rate will increase to approximately 3.0 pct from its current 0.1 pct by the end of 2008.

They may have also based the downgrades on recession fears for 2008.

There may be a sharp slowdown coming, but not here yet.

And if it does happen, it won’t last long with all the net federal spending in the pipeline..

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