Achuthan: U.S. Recession Isn’t Coming — It’s Probably Already Here
Lakshman Achuthan, one of the most respected economy watchers you'll find, is standing by his message. And it's not the message the optimists out there are going to want to hear.
Achuthan, who co-founded the Economic Cycle Research Institute, told Bloomberg Television Tuesday that the U.S. is already in a recession (watch the video here). This isn't the first time he's been gloomy, far from it in fact, but considering the ECRI is as highly thought of as an economic group gets, his comments carry a certain amount of weight.
"What we said back in December was that the most likely start date for the recession would be in Q1 and if not then, by the middle of 2012," he said in the interview. "I'm here to reaffirm that. I think we're in a recession already."
In discussing whether this could be a matter of how one defines recession, Achuthan offered the following: "It is not a statistic; it is a process between production, employment, income and sales. When you look at those four measures, they are rolling over. It is not all about GDP. It is about jobs. It is about income and sales. A recession is a vicious interplay among output, input, employment, income and sales."
Staying on Message
Achuthan has been delivering a fairly downbeat message for some time. Consider his past few visits to The Daily Ticker. Last August, he said more weakness was coming, but he wasn't ready to say a recession was imminent. A month later, he said the economy was going to "get a lot worse." In April, the ECRI's weekly leading index was positive, but then in May, he said he was of the mind that the U.S. was heading into a recession.
Back to today, when he says he thinks we're in it.
Anyone who spends a little time looking at economic indicators, and their multiple revisions, is going to have a hard time finding a period in history when every single data point was signaling all-systems-go growth. "Mixed" is often the norm, meaning as some data strengthen, others weaken. Housing can be good, durables can be bad. Exports can be strong, domestic retail sales can be sluggish, etc. That's the way it is.
Figuring out the true state and direction of the economy isn't easy, and it's anything but certain. If it were otherwise, we wouldn't read and hear debate after debate in the business press on a daily basis. You might remember back a couple of years ago, when the National Bureau of Economic Research said the "great recession" ended in June 2009 (and continue your walk down that memory lane here). When things are leaning toward the good, we tend to hear a lot from the "yes, but ..." crowd. When things are tilted toward the bad, the contrarians emerge to find the silver lining. Let's face it, hold a point of view long enough, eventually you'll be right. One can always find the appropriate statistics to support one's own position.
Getting Crowded Over Here?
That said, Achuthan isn't alone in expressing considerable concern these days. From CNBC.com only today: "The fiscal cliff is not just a year-end story," wrote Michelle Meyer and the economics team at Bank of America Merrill Lynch in a research report. "We expect the uncertainty shock to be realized in the coming months, escalating before the election."
Just a day ago, economist Nouriel Roubini, known to be something of a dark cloud, made headlines for saying the "perfect storm scenario" he's been envisioning is coming to pass. His storm of bad things is made up of a U.S. growth slowdown, continuing debt problems in Europe -- and they do seem never-ending -- a dropoff in activity in emerging markets -- namely China -- and the possibility of fighting in Iran.
Now think back to last Friday and the weakness in the June jobs report. The domestic labor market had been showing signs of tentative improvement not so long ago, but the past few months have called into serious question the desire among employers to do much hiring.
As is often the case, it's not complete misery. Yahoo! Finance's Dan Gross pointed out this week that "the rampant financial failure that crippled the system and the economy in 2008 and 2009 has been ebbing." Among the positive signs he finds are the fact that bankruptcies are declining, that consumers are doing a better job of taking care of their revolving credit and that bank failures are slowing markedly.
In total, this doesn't mean we've come to the end of capitalism as we know it. But considerable amounts of data and a number of well-regarded observers seem to be saying that light at the end of the tunnel isn't getting much closer just yet. So plan accordingly.
Now it's your turn to weigh in. Is there too much negativity about the economy, and if so, is it a self-fulfilling prophecy? Or is it better in the real world than economists and the media might lead you to believe? Share your thoughts.
