(10 am. – promoted by ek hornbeck)
A couple days ago I read an interesting article on the aljazeera web site titled Double-dip recession is unlikely. What made the article interesting wasn’t the source, or the claim, it was the reasoning behind the claim.
Most post-war recessions were kicked off when car sales and house sales and new construction plummeted.
There seems to be little risk of a substantial decline in either car sales or house sales and construction, primarily because the levels are already so low….
Both car sales and housing construction are already so low that they don’t have much room to fall.
What the author is claiming is “things are already so bad, it’s hard to imagine them getting worse.”
That’s a very interesting claim, but I doubt the author of the article learned it in an economics class. It sounds more like something he heard in a bar, and seemed to make a lot of sense after a few drinks.
That’s not to say he doesn’t have a point of sorts. It’s just that his point is that we are in a Depression.
The major banks have revised GDP estimates for the 2nd half of this year and start of next year to barely above 0%. But does that mean anything?
I found this chart at Calculated Risk.
Notice the tight correlation between the manufacturing indexes and recessions. It basically says that the “recovery that wasn’t for Main Street” is over.
Of course, using the composite ISM isn’t the only way to predict a recession.
When the probability model looked at data from a Thomson Reuters/University of Michigan survey, it found that the likelihood of a recession was 80 percent.
Even more, the latter survey revealed that consumer confidence is at its lowest level since May 1980.
So manufacturing is falling and consumers are even more discouraged than they were during the depths of the 2008 panic.
Bloomberg uses the method of measuring YoY changes to real GDP. Their method has a striking accuracy rate.
“Since 1948, every time the four-quarter change has fallen below 2 percent, the economy has entered a recession. It’s hard to argue against an indicator with such a long history of accuracy.”
So what does that mean for employment?
Not good. Not good at all.
Housing is sliding again. The subprime bust is largely over, but the rest of the housing market hasn’t found a bottom yet. ¿Qué más?
There are also indications of a double-dip on the consumer level. Small-business are cutting back hours and hiring less.
It remains hard for people to get credit.
Speaking of credit, banks’ trust in other banks is in a decline as well.
Quite probably the most striking chart of all is this one. It reflects back on the article that started this essay.
Just because a recession has ended doesn’t mean the Depression is over.
The Great Depression didn’t end when FDR took office in 1933 and the economy started growing again.
And the end of the “Great Recession” in 2009 didn’t mean that the current Depression was over either.
What we managed to do was to throw trillions of dollars at Wall Street to bail out the multi-millionaires that caused the mess and propping up the unsustainable status quo.
Now that the trillions have been spent the economy is sliding back into decline, except this time we don’t have trillions more to throw at the problem.
All that is left is either a) the public taking to the streets and forcing the politicians to enact real reforms, or b) continued public apathy and ever increasing suffering with dead-end austerity.