It has come much later than the great housing crash of 2007 seemed to presage, but the deep downturn of the US economy is now upon us. Massive job losses occurred in September and October. In the first half of this year, job losses ran at about 60,000 per month. In September, revised numbers show 284,000 jobs lost, which is far worse than the initial report of 159,000. (Cynics might suspect some shading of the bad news by a Republican administration for electoral purposes.) In October, an additional 240,000 jobs disappeared. The jobless rate has now climbed to 6.5 per cent.

Retail sales for October plummeted at all except the discount stores and automobile sales have been terrible. Business economists are finally admitting that this is going to be the most serious recession in decades. That is not saying much, since the US economy has not experienced a major crisis or significantly widespread hardship for as long as most of us can remember. In reality, these will almost certainly be the worst economic times since the Great Depression.

The problem is that US economic growth this decade was driven by the housing boom and by a consumer boom based on heavy borrowing. Both of these underpinnings have been kicked out from beneath the economy and they cannot come back any time soon. We built more houses, and more expensive houses, than we had families with the means to own them. That created bubble jobs in construction, real estate, mortgage lending and finance that all borrowed from future activity. As a nation, we spent six or seven per cent more than we earned throughout the Bush years, which created more bubble jobs. Our indebtedness reached record highs and our households' credit is now shot. So, for example, the car companies cannot lend many people money to buy new cars, because so few potential customers are creditworthy. The collateral for much of the borrowing binge was home equity, which has been largely wiped out as home prices have slumped. House prices have still not found the level at which demand will equate to the bloated supply, and indeed that is a moving target.

As jobs disappear, there are still fewer prospective buyers for homes. It will be a long while before home equity loans finance good times again. Credit card companies are also running scared their customers will default in growing numbers, so they are pulling back on their credit lines. Down and down we go.

Left to its own devices, the economy would become very ugly. Consumer spending and business investment would spiral down, taking jobs with them: that is a given in the aftermath of the bubbles. Worse, the steady jobs may be at risk, too. As state and local governments' sales and income tax receipts fall, they will be forced to raise tax rates or to lay off their employees, since in the US only the federal government is allowed to borrow for current spending (as distinct from capital investment). We are already seeing signs of that from California to Alabama to New York.

It is for those reasons that President-elect Obama's first news conference, held on Friday, was especially important. The federal government is the only hope for salvaging the US economy.

Barack Obama certainly hit all the right notes. The first thing he mentioned was extending unemployment benefits. The second was fiscal stimulus, "long overdue". He would not predict whether this will pass before he becomes president, since that is clearly between President Bush and the current Congress, but he left no doubt that he sees an urgent need for intervention. The third item he mentioned was the need to support municipal and state government budgets to avoid unnecessary layoffs in that sector. He also touched on the needs for a global crisis response, for rescuing the American auto industry through a program to re-tool for fuel-efficient cars, and for reviewing the bank bailout and for ensuring measures to stem home foreclosures.

The perspective seemed exactly right and Americans will probably derive confidence from it. It is a relief that the President-elect has surrounded himself with sensible economic advisers, from the venerable former Federal Reserve chairman Paul Volcker, who stood next to him at the press conference, to former Clinton Treasury Secretaries Robert Rubin and Larry Summers and business thinkers Warren Buffett and Eric Schmidt, the Chairman of Google. Obama said he was not going to rush into naming his Treasury secretary but he certainly has plentiful talent around him from whom to choose.

These challenging economic times will require every ounce of deliberation and talent the President-elect can muster.