A RECOVERY THAT LOOKS LIKE RECESSION
For some strange reason a number of economists and strategists seen on TV and quoted in the press maintain that the exceedingly weak recovery we are now undergoing is really a “normal” or “average” recovery. Nothing could be further from the truth. This is not our opinion, but is based on fact. We have taken eight major economic indicators and compared them to where we are now as compared to the economic peak 33 months ago. We did the same for the equivalent time periods for the prior two business cycles, using dates designated by the National Bureau of Economic Research. We did not use surveys, opinions or diffusion indexes, but relied on basic economic indicators related to employment, income, consumption, production, housing and capital expenditures.
The results are very clear that the current recovery is far weaker than the prior two expansionary periods, which themselves were below the average for post-war recoveries. The results are outlined as follows. Remember, for each indicator we are showing the change over 31-to-33 months after the cyclical peak for the economy.
1) GDP was up 5.3% and 5.7% at this point in the last two cycles, and is now down 1.3%
2) New home sales were down 8% and up 31%; now down 42%.
3) Industrial production was up 3% and 1%; now down 7%.
4) Retail sales were up 9% and 12%; now down 4%.
5) Payroll employment was flat and down 2%; now down 5%.
6) Personal income was up 11% and 7%; now up 2%.
7) New orders for durable goods were up 5% and 6%; now down 22%.
8) Initial weekly unemployment claims were down 5% and 9%; now up 34%.
The facts speak for themselves. The current recovery is far weaker than the prior two, which themselves were weaker than the average for post-war expansions. Moreover, as we discussed in previous comments, even this sub-par recovery has been losing steam in recent months. That is why six months ago the discussion centered on when and how the economic stimulus would be removed, whereas now all of the talk is about another round of quantitative easing (QE2). Does anyone really think that the probability of QE2 a full 33 months after the economy peaked and 15 months after it bottomed is really saying anything positive for the economy or the stock market? The current market seems based on the same delusionary views that prevailed at the tops of early 2000 and late 2007. In our view the economy will continue to disappoint for some time to come. That is not being discounted at current market levels.
My brother is moving in with me, people in my close circle of friends who survived the layoffs of ’08-’09 are now experiencing the stress of co-workers and significant others being laid off (just in the past month to 2 weeks), my oldest sister has been unemployed for going on 5 years (partly due to health) and has been living on food stamps (correction, gov’t support card) and other free handouts (not to mention defaulted on her mortgage 2 years ago and the bank STILL hasn’t foreclosed)…Does this sound like your average recession?
I feel like things are spiraling quickly out of control right under our recession-recovered noses.
Don’t worry Stephanie the National Bureau of Economic Research declared the recession is over.
The War in Iraq was declared over as well.
It can be very easily shown that over time, the length and severity of recessions has increased in step with increasing government interference in the economy. This being an election year, what is happening in the media is a coordinated attempt by liberal pundits and economists to fool the unsophisticated and the ignorant masses into thinking that all is normal and Obama’s policies are working. Thanks for speaking the truth.
Ever since the US abondoned the gold standard in 1933, the US has had an inflationary monetay policy. Williams Jenning Bryan would be satisfied. Whenever a recession has occured, the Fed has dumped money on the economy to bring it out of a recession. The result is that the imbalances that lead to the recession never quite get worked out. Those imbalances then set the economy up for the next recession. The result is that over the last 40 years, we have had a boom and bust economy, with the cycles become more frequent and and sharper with time.
No, that’s just flat out wrong. The boom and busts were far worse under a gold standard. Look it up.
I’m not sure what JH considers boom and bust. From the period of 1870 to approximately 1925, a period of asset backed currency, there were 4 depressions, 1873, 1893, 1907 and 1919 for an average of about 15 years apart. Although anecdotal descriptions make them sound severe, historical statistics would make these depressions mild by 20th century standards. On the other hand, in the last 40 years there have been 7 recessions, for an economic contraction on average about every 6 years.
Another great article.
Bummer though it may be.
Thanks just the same.
The boom-bust cycle in a nutshell:
1) The government backed banking cartel creates money (credit) by lending it out = boom.
2) At some point the debt becomes unserviceable = panic = reduction in lending.
3) Repayment of existing debt = destruction of money = destruction of aggregate demand = bust
The problem is not fiat vs gold but that the bankers have a government backed and government enforced monopoly on money (credit) creation.