There’s a lengthy and informative commentary by ECRI’s Lakshman Achuthan at The Big Picture. For some reason or other it doesn’t show up when I go through TBP’s regular user interface but it’s hosted there all right. The commentary outlines the reasons that Achuthan’s organization has been calling a recession by the end of the year, why it continues to do so, and why he thinks we’re already in recession:
In our experience, too, monitoring business cycles is often humbling.
In March 2001, 95% of economists thought there would not be a recession, but one had already begun. And we do not recall anyone outside our shop predicting the 1990-91 recession beforehand.
Hardly any economists recognized the severe 1973-75 recession until almost a year after it started. Indeed, that recession began with the ISM at 68.1, and payroll jobs growth did not turn negative for eight months.
In 1970, unaware that the economy was nine months into recession, none other than Paul Samuelson said that the NBER had worked itself out of a job, meaning that improved policy expertise had made recessions very unlikely.
The key point here is that it is really difficult to know that a recession has already begun – until long after the fact.
Reports of the business cycle’s demise are greatly exaggerated.
I will continue to argue that we never really left the last recession. The only reason UE-3 has fallen (other than a brief bump from census hiring) was declining participation rates, i.e. people giving up. (And that has not been because everyone got old and retired suddenly. Look at participation rates by age and that line of argument is exposed as BS.) As Mish Shedlock loves to point out, new hiring hasn’t even been enough to cover new entries to the labor force.
Even those with jobs are getting squeezed by inflation and increased costs for healthcare. And even without those trends household incomes continue to fall.
What kind of recovery sees stagnant employment and declining wages?
Also seeing a report that low wage workers in Chicago have grown in number, gotten older and are better educated than they were ten years ago. This pretty much mirrors what I’ve seen about national trends in this regard.
Where’s the recovery?
I don’t know what’s in the NBER’s secret sauce, Ice. There are good reasons for their being coy about it—a sort of uncertainty principle.
But they say the recession ended so it ended.
Chicago is pretty clearly in recession. Total real income of Chicago residents is declining (while metropolitan area income rises). Retail sales are down. Real real estate values are falling.
Real real estate values are falling.
I know what you mean, but that’s still a funny looking sentence.
I don’t know what’s in the NBER’s secret sauce, Ice.
Yeah, I wonder about those kinds of things. In particular I don’t know why the BLS doesn’t publish their Black Box for input/output on the Birth/Death model for the establishment survey. I assume because it is much less of a black box than a tinker-toy.
Its starting to sound like the State of Illinois workers could be striking after the elections. Contract negotiations stalled; the Administration is insisting that it needs all state workers to take a pay cut equal to two pay steps, a three year freeze on wages and steps, and increased contributions for healthcare.
I think that the next shoe to drop in Chicago (other than the CPS admitting that it can’t get the money to pay the teachers what it’s promised them) will be the police and firefighters. They, too, are among Chicago’s higher income earners and their cost of living will rise as the CPS tries to pay the teachers.
Right now the mayor is floundering around suggesting a bunch of use taxes (higher cigarette tax, “security tax” on electric bills) all of which are regressive. I seriously doubt that any of his proposals will raise the kind of money that’s going to be needed.
What they really need to do is to cut pay and benefits, not raise them.
Quite true, which is why the NBER doesn’t make pronouncements until after the fact. You know when you are in one, you don’t often know when one is coming. That being said, as you point out periodically Dave, we are well into this anemic recovery and by historical standards we should be raising our probability assessments regarding entering the next recession.
I think that the business cycle is being swamped by a larger phenomenon. The Great Recession is still ongoing, but there are still the normal factors at work. Great Recession may not be the best description. Depending upon your circumstances, you will be affected differently.
Wut?
The Great Recession is part of the business cycle not something seperate, as such the above statement needs some clarification.
While the Great Recession has ended some time ago, the effects for a large number of people are still being felt. Many of these people live in depression like conditions. To them, a recession is not going to affect them much. Retirees are being impacted by the ZIRP, and they are living in depressed conditions also.
Ahhh, that makes more sense Tasty.
Also for the watch, Q2 GDP revised downwards again and durable goods orders falling.
Recovery Autumn!