Cliff Hanger

Stock market analyst John Hussman says that the U. S. is tipping into recession:

With industrial production, capacity utilization, real disposable income, real personal consumption, real sales retail and food service sales, and real manufacturing and trade sales uniformly declining in their latest reports, coincident economic indicators – having generally peaked in July – are now following through on the weakness that we’ve persistently observed in leading economic measures. We continue to believe that the U.S. economy joined a global economic downturn during the third quarter of this year.

While we use a broad range of signal extraction and noise-reduction methods in our own work, the economic data in recent months has required less and less sophisticated analysis, as many of the most reliable leading economic measures have turned clearly lower (e.g. Philly Fed Index, Chicago Fed National Activity Index, and the new orders and order backlog components of numerous regional and national Federal Reserve and purchasing managers surveys). Still, the leading/coincident/lagging relationships across these indicators remain important. Not surprisingly, analysts have now turned to the last refuge of the economic data, which is to focus on historically lagging measures such as payroll employment.

to which Alan Abelson adds:

While the past few weeks’ economic numbers have tended, not surprisingly, to trace the economy’s recovery from the superstorm, it emerges that consumers have turned parsimonious again. Their outlays, far from setting any worlds on fire, actually contracted a fraction or two, along with the size of their paychecks. Besides the littered legacy of Sandy, consumer-price increases, and the fear and loathing of the fiscal cliff merit a chunk of the blame.

Our precarious perch, which is a great place to watch the fiscal drama unfold, unfortunately provides no clear view of what might transpire between now and the end of the year, when the draconian fiscal measures are due to become law unless the fractious powers-that-be come up with some desperate plan that would win the nod to avoid the encroaching cliff and a conceivable lapse into recession.

I don’t know whether the economy will grow slowly, contract, or expand next year (Yuval Rosenberg suggests that it’s not a question of whether the economy will grow slowly but how slowly). I do know that recoveries don’t go on forever and, phlegmatic, even imperceptible to many of us as the present recovery has been, it, too, will draw to a close.

They say that step one is admitting you have a problem. Are we there yet?