One of America’s most reliable economic forecasters says the current recession – the longest in half a century - will end this year, possibly as early as this summer. Lakshman Achuthan, Managing Director at the Economic Cycle Research Institute (ECRI), was one of the first to declare that the US was in a recession. Now he’s one of the first to say its ending. ECRI, he says, is the research group in the world that studies business cycle recessions and recoveries for a living, and has a near-perfect record of predicting. They do it by crunching various pieces of data and creating “leading indicators†which show where the economy is headed The indicator that looks the furthest into the future actually started showing signs of future growth as early as last November, as the worst of the credit crisis started to ease. Another indicator, with a shorter lead-time into the future, started pointing toward growth in early December. Both indicators have showed steady growth since then and that, says Achuthan, is enough data for him to say this recession is ending. That’s because, over the last 75 years, when those indicators turn up, the recession ends within four months. No exceptions, says Achuthan. http://ac360.blogs.cnn.com/2009/04/3...s-almost-over/ Achuthan points out that these same indicators predicted the current recession, by turning downward BEFORE the recession began. Specifically, Achuthan notes, his leading indicators turned downward in Early June, 2007; the current recession “officially†began in December of that year. Because of that, Achuthan was able to announce that the US was in recession some NINE MONTHS before the National Bureau of Economic Research, which is the official arbiter of recessions, did. But don’t buy the party supplies just yet. The end of a recession simply means that things will start becoming “less negative.†A top adviser to President Obama says the economy will again shrink in the 2nd quarter of this year – that’s the period we’re in now. But Achuthan declaration doesn’t really counter that – he doesn’t think recovery will start until the 3rd quarter – sometime after June. But how do you have a recovery if job losses continue? The Labor Department says 6,300,000 people are now drawing unemployment benefits – that’s a record. And a number greater than that are unemployed but NOT collecting benefits, because their benefits have run out. Achuthan worries that during a recession, we all become more productive, by working with less (we fill in when our colleagues are laid-off, for instance), and so you don’t need to hire all of those people back for the economy to recover. The danger of that is that many millions of people who have lost their jobs may not get them back in this economy – and that can create great disparity in society – “haves†who have more; “have nots†who have less.
I am not really sure on that. IMHO for economists, if you put ten of them in a room, you get 11 answers. Caveat, no Keynesian advocates among the 10.
Agree with you on this wisdomtool but Lakshman Achuthan really point out few good things there. Hope everything works as what he saying. DON.
Being involved closely with a financial sector, I have observed these economists/analysts from close quarters. I find them no more than people throwing darts in the dark. The luckier one gets to hit the bull's eye and he goes about flaunting the same for the rest of his/her life! Regards, RightMan
Recession markers are hard to define, particularly when you are in the middle of one. It took many months for economists to figure out that the recession actually began in November (or December) 2007 so when we're finally out of this one, it'll be six months or more before the bottom has been identified. That being said, there are a number of things which concern me regarding the recovery, chief among them being the outrageous debt level we're being left with. That debt will have a drag on the recovery, perhaps plunging us back into a recession again and soon. You cannot spend your way out of a recession, at least to the degree that our politicians have been doing. I also see some local markets still being in a world of hurt. Housing is a huge factor across the USA, with some markets -- Phoenix, Las Vegas, most of Florida and Southern California -- being the most challenging. In addition, how the bankruptcy of Chrysler and the reorganization of GM works out will have a profound impact on the economy going forward. The supply chain for automobiles in this country is long and it is wide. Like one of the previous respondents mentioned, if you put a bunch of economists in a room, you'd get any number of answers from them. I would like to see things improve, but my personal "consumer confidence" remains quite low.
Recession cannot end until the recovery period is started. While Recovery period comes in recession. So we can expect Peak/Boom.