Skip to comments.12 Reasons Recession is Upon Us?
Posted on 06/25/2012 8:22:41 PM PDT by blam
12 Reasons Recession is Upon Us?
25 June 2012
Ive bucked the recession calls now for a long while, but I see new recession calls becoming increasingly popular. In a recent update Mike Shedlock offered 12 reasons why economic optimism is unfounded. He says:
1. Europe is a disaster.
2. US manufacturing is cooling rapidly
3. China is cooling rapidly: China Manufacturing PMI 7-Month Low, Sharpest Decline in New Export Orders Since March 2009
4. US Monetary policy is at best useless, but more likely net harmful, especially to those on fixed income.
5 First year presidential politics are frequently recessionary
6. US still needs fiscal tightening
7 Unemployment insurance has expired for millions: 200,000 Lose Unemployment Benefits This Week, Nearly Half From California
8. Self-Employment desperation: 100% of U.S. Jobs Added Since 2010 Have Been Self-Employment, Contractor, or Other Jobs Without Unemployment Insurance Benefits
9. Last two jobs reports have been dismal: Another Payroll Disaster: Jobs +69,000, Employment Rate +.1 to 8.2%, April Jobs Revised Lower to +77,000; Long-term Unemployment +310,000
10. The 4-week moving average of weekly unemployment claims is at the highest rate of the year, at 386,250.
11. New home sales cannot gain significant traction: New Home Sales Hype vs. Reality
12. Tax Armageddon
Im still bucking the negativity trend for now and Ill give you one big reason why. My expansion/contraction model has been right on the money for the last 12 months as many of these recession calls have become more pronounced (maybe my time for being wrong is overdue though!). One of the more glaring non-recessionary components of my model is a big one fixed private investment. In the last 45 years ALL SEVEN recessions have been led by a decline in fixed private investment. The only close call was the 82 recession which was really a double dip.
The Q1 2012 reading was 10% year over year. So if were in a recession or on the verge of a recession then fixed private investment must be cratering as we speak. That, or its different this time. And while I hesitate to say that it cant be different this time, we have to recognize that economic forecasting is largely a game of playing the odds and the odds of a recession with fix private investment at 10% is extremely low. I think recession is much more likely in 2013 as the fiscal cliff comes to fruition.
You forgot the Lipstick index.
It is darkest before dawn, when all of the Chicken Littles are convinced that the end is near. Then the Sun rises.
Private Investment is up 10%.
Web 3.0 is revolutionizing the online world.
Fracking is increasing U.S. oil and natural gas production that is driving down gasoline and electricity costs.
In other words, the Recovery has begun with investment and major tech revolutions.
Ice cream and a DVD from RedBox is a nice cheap treat for people who can't afford to go to the movies.
I believe alcohol sales are also a lagging indicator of a recession (or depression).
He was just quoting from the Mish Shedlock Article, 12 Reasons US Recession Has Arrived (Or Will Shortly) which is the article I should have posted.
Roche may be on something ... for now. Fixed private investment goes into physical assets such as machinery, land, buildings, installations, vehicles, or technology. Low interest rates allow blue chips, banks, schools, hospitals who can get sub 3% loans to throw up a bank branch, expand the auto fleet, etc. This can go on for awhile. But without additional activity — like energy — fixed investment is too narrow and opportunistic to carry the entire economy. So if oil continues to crash and energy-related investment dries up, it’s over.
Let’s look at FRED FPI data:
Then look at China data at: http://www.stats.gov.cn/english/pressrelease/t20120612_402811464.htm
Which tail is going to wag which dog? Energy and exploration have been huge drivers in the U.S. for FPI. If oil collapses — and the China chart indicates no demand from that quarter — it’s really over.
“Upon us” you say? When did the last recession end? Until Obama came along I made above average money, now I’m **this** close to being homeless.
A final chart: M2 money velocity has plunged to historic lows (see: http://research.stlouisfed.org/fred2/series/M2V/). The economic power generated by Fixed Private Investment is a mist, not a downpour. The dry spell will really be evident in ... October! (Remember October 2008!)
“In other words, the Recovery has begun with investment and major tech revolutions”
Uh, you fail to recognize that Obumbo is STILL the POTUS.
There will be no recovery as long as he holds the keys.
You’re right. I see it in my business.
“I knew things were bad when I saw our ice cream sales go through the roof.”
My gauge was the number of wheat pennies and bicentennial quarters I receive in my change; these have spike dramatically in the past year or so. People are digging deep.
Also, in my area people a few years ago people had their cars broken into for GPS units; now they are broken into for dashboard/console change.
“I believe alcohol sales are also a lagging indicator of a recession (or depression).”
Bars in my area are getting crushed; some still make money from illegals pounding Coronas when their workday is done, while others survive on the discretionary income of young childless yuppies, but for the most part the hardworking working class customers are a thing of the past (they haven’t worked in years).
“In other words, the Recovery has begun with investment and major tech revolutions.”
That is great news for Asia (that is where our tech and financial jobs from the northeast have gone).
Could growth of homebrew have any impact on the official sales?
“Could growth of homebrew have any impact on the official sales?”
No, more like “home bars”. Starting with the smoking ban here in NJ, many regulars started setting up their basements/garages with large flat-screen TVs, pool tables, dartboards, etc. (as their kids grew up & moved out). The recession has only compounded that phenomenon, as people spend a lot less on the same beer, smoke where they please, etc.
I don’t want to make anybody feel bad, but Houston is doing pretty good.
Homes are selling at the same price as last year. Companies are hiring (but the wages offered are lower).
What a difference it makes to have a pro-business, pro-growth government.
I’m happy to hear that; I hope they can learn from the mistakes made here and keep it that way.
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