Wall Street yesterday derided President Bush for insisting that America had not fallen into a recession just as Washington published appalling economic growth and jobless numbers.

New York's stock market ignored President Bush's optimistic remarks and the Dow Jones Industrial Average fell 130 points - representing a 1 per cent decline.

Official statistics yesterday showed that the number of Americans claiming unemployment benefit over a four-week period now matches the level immediately before the last recession in March 2001. Last week, jobless claims across the US jumped 19,000 to 373,000, well above the expected 350,000.

At the same time, revised numbers showed that the American economy had grown at 0.6 per cent in the fourth quarter of the year, having shrunk from 4.9 per cent growth in the third quarter.

However, President Bush yesterday urged Wall Street to wait for the effect of his $150 billion tax rebate economic stimulus package to filter through.

"We've acted robustly and now it's time to determine whether or not this program will actually work,” President Bush said. “There's no question the economy's slowed down. I don't think we're headed to a recession."

However, Ian Shepherdson, chief US economist at High Frequency Economics, said: "Who cares what the President says? Look at the numbers. The housing sector is in meltdown. Jobless claims are now at a recession pace. The domestic economy shrank in Q4. The only thing that saved America were strong exports - thank God for the weak dollar."

He added: "The big risk is that a recession lasts a lot longer than the normal cycle of about three quarters of a year. This time it will take time for Americans to sell their homes rescue their overstretched finances because they are trying to sell all at once. Discretionary consumption is likely to be trashed, that didn't happen in the last recession, and it is very alarming."

Elsewhere in Washington, Ben Bernanke, chairman of the US Federal Reserve, yesterday told Congress that America is “not anywhere near” the dangerous stagflation situation that prevailed in the 1970s.

“I don’t anticipate stagflation,” Mr Bernanke told the Senate Banking Committee. Later this month (March), the Fed is expected to cut interest rates by another half of a percentage point to 2.5 per cent in a bid to boost consumer spending. But there are fears on Wall Street that the successive rate cuts could fuel a sharp rise in inflation, currently at 4 per cent.

Explore Economics

• Pre-Budget Report 2008

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive