When will the Recession end? Here's a collection of opinions.
This is the subject of my Mini poll which I invite you to vote in just below my Web site clock to the right. I did a search on the question and I have compiled a file of opinions on the subject by a variety of sources and experts. If you are interested in these opinions I have selected some of the more interesting ones and will insert them below in Italics. They are listed in Chronological order starting in March 2007 and ending with an entry from today. I have underlined key phrases to help you get through it more quickly.
March 7, 2008
If Recession Is Now Here, When Is It Going to End?
By: Reuters | 07 Mar 2008 | 02:48 PM ET
A second straight month of job losses all but ended the debate over whether the US economy has slipped into recession. Now the question is how to get out.
"Turn out the lights. The party's over. We are in a recession," said Joseph Brusuelas, chief U.S. economist at IDEA global in New York.
Don't count on debt-laden households to spend their way back to growth. As for banks, they are preoccupied with cleaning up their balance sheets after seven months of credit turmoil, which means they are unlikely to throw open the cash spigots. The federal government is mired in debt as well.
All that adds up to a protracted period of deleveraging -- a fancy word for paring debt -- and perhaps an equally long period of subpar U.S. economic growth.
While most economists still believe that the economy will rebound in the second half of this year as U.S. Federal Reserve interest rate cuts and government tax rebates kick in, some are starting to push back the recovery date into 2009.
U.S. employers cut 63,000 jobs last month, according to Labor Department data released Friday. That followed a loss of 22,000 jobs in January. December's job growth was only half as big as the government had earlier reported.
Economists even found bad news in the fact that the unemployment rate fell to 4.8 percent from 4.9 percent, noting that this was merely the result of a steep drop in the size of the work force because more people gave up looking for jobs.
Employment holds the key to the U.S. economy because jobs mean paychecks, paychecks mean consumer spending, and spending accounts for about 70 percent of the economy.
"The debate should no longer be about whether there is or is not a recession, only about how deep it will be," said Nigel Gault, chief U.S. economist with Global Insight in Lexington, Massachusetts.
Consumers were already under strain from the slumping housing market and rising costs for food and energy. A report Thursday showed that household net wealth fell for the first time in five years. The savings rate has hovered around zero for several months.
With credit market turmoil prompting banks to tighten lending standards, consumers have had a tougher time qualifying for cheap mortgages, auto loans and home equity lines. That suggests households will cut spending.
Later on Friday, the Federal Reserve will release data on consumer borrowings and interest rates for January. Borrowings had been on an upswing for much of 2007 but the growth rate abruptly slowed in December, heightening concerns that consumers may be tapped out.
The White House acknowledged that the U.S. economy was stuck in a period of "low growth", and pointed to a recently passed $168 billion stimulus package as a way to address it.
Lehman Brothers economist Ethan Harris said the rebate checks would not be enough to prop up the economy.
"We now believe the tax rebate checks will arrive too late to prevent an outright recession," he said, adding that he expected the economy to dip into negative territory in the first and second quarters of the year.
"While we are penciling in a very mild recession, it is important to not get hung up on the 'recession, no recession' debate. The more fundamental point is that the economy is likely to experience an extended period of very weak growth, a rising unemployment rate and significant further Fed rate cuts."
The best hope for the federal stimulus package may be a less-discussed provision that gives companies a tax incentive to make purchases this year. That may boost corporate spending, cushioning the downturn.
There was one small silver lining in the ugly employment report. A sluggish labor market eases inflation pressures, making it easier for the Fed to lower interest rates.
The central bank has already cut rates by 2.25 percentage points since mid-September, and another cut of at least a half-point is widely expected when its policy team meets on March 18. Goldman Sachs economist Jan Hatzius said an emergency rate cut before that meeting was not out of the question.
J.P. Morgan's chief economist, Bruce Kasman, said he expects the Fed to cut by three-quarters of a point at the March meeting, and another half point in April.
"It is appropriate to characterize the U.S. economy as having entered a recession in the first quarter," he said.
Nov. 5, 2008
When Will The US Recession End?
By Brian Kelly on November 5, 2008
Now that the election is over, President-elect Obama has a tough economic road ahead. The advanced GDP report of -0.3% suggests that the US is in a recession. The $64,000 question is how long will the recession last. An examination of a few economic forecasting tools gives an approximation of when then recession began and likely end points.
A widely used index of economic activity is the Chicago Fed National Activity Index (CFNAI). The index is released monthly and is a weighted average of 85 indicators of economic activity. Since the index is calculated using monthly data it can be used as a leading indicator for quarterly GDP. The foll0wing chart shows the CFNAI since 1967 with recessions in red.
The Chicago Fed produces two indexes, a monthly index and a 3 month moving average of the monthly index. The 3 month moving average index smooths any volatility in monthly numbers and is used for economic forecasting.
A zero value for the 3 month CFNAI indicates that the economy is expanding at rate of growth that is consistent with its historical trend. An index reading below -0.70 following a period of expansion indicates that a recession may have started. A reading above 0.70 two years into an economic expansion indicates increased probability that a sustained inflationary period has begun.
The 3 month CFNAI crossed below -0.70 in December of 2007 and is therefore the likely start date of the current recession. According to the NBER, since 1967 there have been6 recessions. The longest recessions lasted 16 months and occurred from November 1973 to March 1975 and July 1981 to November 1982. The shortest recession started in January 1980 and ended in July 1980, for a total of 6 months. The average recession lasted for 10.8 months.
Using the NBER figures and a start date of December 2007, the following recession window can be interpolated:
Recession Start Date: December 2007 Possible Recession End Dates
Long Recession: 16 months April 2009
Short Recession: 6 months May 2008
Average Recession: 10.8 months mid-November 2008
From this table it is clear that the US will not experience a short recession since that would have been completed in May of 2008. The most recent advance GDP report of -0.3% suggests that the recession may not end in mid-November 2008. The only end date left is a long recession with a potential end date of April 2009.
The start date of the recession is consistent with Federal Reserve models of the probability of recession. In a 2006 report, Jonathan Wright a Fed researcher, developed a model for predicting the probability of a recession using the Treasury yield curve. The model developed used the 10 year - 3 month spread and the effective fed funds rate.
The Federal Reserve Bank of Philadelphia also publishes the probabilities of a recession in its Survey of Professional Forecasters (SPF) report. This data goes back to 1968 and shows the probability of a recession occurring in the next quarter. (Recession in red)
With this series it appears that 40% probability is the critical level in predicting a decline in GDP in the next quarter. Interestingly, the probabilities breached the 40% level in the first quarter of 2008. While not an exact match with Wright’s Model B or the CFNAI data it is fairly close and can serve as additional evidence that the current recession began near the end of 2007 and the beginning of 2008.
After falling below 40% for one quarter, the Anxious Index breached the 40% probability mark again in the 3rd quarter of 2008. This suggests that forecasters are expecting a decline in GDP for at least one more quarter. This projection means that the recession will last until March 2009 which is consistent with the long recession projection of April 2009.
The next CFNAI report will be released on November 24th and could provide clues as to the duration of the economic malaise. As well, watching the 10 year - 3 month spread and effective rates will be of utmost importance.
Nov. 6, 2008
Economist: Recession will end, but not for a while
by Brad Carlson
The U.S. economy will recover eventually, in part because of recent federal government intervention in the financial sector, said Quincy Krosby, chief investment strategist for The Hartford. “Even if the government gets 50 percent of it right, we will get through this,” she said in a keynote address at the Nampa Chamber of Commerce annual economic outlook breakfast Nov. 6. Andy Dodson’s Edward Jones Investments office hosted the event at Nampa Civic Center. Krosby said the U.S. economy “is in recession and will continue to be in recession before we see the sunlight. ”The economy must deal with collateral damage from the collapse of the subprime mortgage market, now “unwinding” into many sectors, she said. Unemployment will keep rising, and businesses will keep delaying capital expenditures until operators gain confidence in the economy, she said. Credit markets remain tight for businesses of all sizes, and consumers are spending less, she said. The current downturn could last 14 to 16 months, depending on when it started officially, compared to the average recession of about 10 months, Krosby said.
Unemployment could hit 7.5 percent or 8 percent in the U.S., she said. “What they’re trying to do is keep the damage to a minimum, but unfortunately we have been hit and hit and hit,” she said. The Hartford had expected the U.S. to skirt recession despite the high oil prices seen for much of this year, but the credit-market freeze had huge impacts, Krosby said. Banks must continue to clear their books of houses and non-performing mortgages, she said. Problems with subprime mortgages and with excess housing inventories could have been confined to local economies and resolved fairly quickly if the banks had kept the mortgages on their books, she said. Wall Street investors bought the mortgages and demanded more of them as a way to create bonds that paid higher yields – a key reason that the subprime mortgage problem’s impacts spread throughout the economy, she said. Federal investment in money-center banks aims to make sure the banks remain strong and to keep customers confident that the banks will be there long-term – even if they remain tight with credit now, Krosby said. “Confidence has been the missing factor for so long,” she said. She added: “The good news is we get through this, and pent-up demand is going to be created.”
Nov. 14, 2008
Colleges, Take Note: The Recession Will End on August 3, 2010
New York — Predictions of the next turn in this financial crisis are worth, well, little more than the predictions that led us to this point, but that still doesn’t stop economists from looking into the crystal ball.
That’s what Mark M. Zandi, chief economist and co-founder of Economy.com, did on Thursday during a luncheon speech to a group of college money types at a conference held here by Moody’s Investors Service and The Chronicle.
His prediction on when the recession will end? August 3, 2010, he said to a few laughs for naming such a specific date. Of course, he admitted that he didn’t know exactly which day the recession would end, but he was confident that the downturn would be “more severe than any recession” since the Great Depression.
“We are going to be less wealthy for a long time,” said Mr. Zandi, author of Financial Shock: A 360º Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis.
The next six months, he said, are going to be “very painful.” The following six months will be just “painful,” as house prices begin to stabilize in the summer of 2009. The subsequent six months will be “comfortable,” before the country begins to emerge from the crisis in 2010.
Despite painting such a bleak picture, Mr. Zandi said he had three reasons for optimism. One: House prices will begin to stabilize in the middle of 2009. Two: Gas prices are falling. Three: The federal government will provide some sort of stimulus package in the coming months. “The government will be the only institution to get us out of this mess,” he said. —Jeffrey J. Selingo
Dec. 1, 2008
When Will It End?
by Zubin Jelveh Dec 1 2008
Okay, fine. Economists made it official: We're in a recession. Deeply. When might it end?
As if you didn't know yet, the United States is in a recession. The nation's business cycle tracker, the National Bureau of Economic Research in Cambridge, Massachusetts, announced anticlimactically today that economic activity peaked in December of 2007, right around the time employment numbers started to head south and four months after the start of the credit crunch. The Bush expansion—as it may come to be known—does not stack up well against the Clinton boom of the 1990s on many measures. For one, the economy grew for 120 straight months in the 1990s versus 73 this decade. Incomes also grew under Clinton while they remained stagnant under Bush. Gross domestic product per capita, a rough measure of living standards, grew by 51 percent during the tech boom under Clinton versus 33 percent during the real estate boom under Bush II. (But if you compare the average monthly gain in G.D.P.-per-capita, Bush squeaks out a win: 0.45 percent versus 0.42 percent.) But the main question on everyone's mind now is when will our bust come to an end? If you look at the yield curve, historically a very reliable indicator of swings in the business cycle, activity should pick up by the end of 2009. That would mean that the recession will be longer than many professional economists are forecasting. Which shouldn't be a surprise to anyone, considering what a bad job forecasters did with predicting this recession.
Another recent reliable indicator is actually the N.B.E.R. recession announcement itself. During the two previous downturns, in 1990 and 2001, the N.B.E.R. made its recession call after the actual downturn had ended. Unfortunately, a global financial disaster makes the chances of that good fortune happening this time around close to zero. In fact, November marks the eleventh month of the current retrenchment, beating the average length of post-World War II recessions by one month. And if the recession lasts past April, it'll be the longest downturn since the Great Depression. With the N.B.E.R.'s announcement, the U.S. joins a growing group of rich countries that are also in official recessions—a list that includes Japan, New Zealand, and the 15 countries of the euro zone.
Dec. 2, 2008
The recession: When will it end?
Posted by Harriet Brackey on December 2, 2008 at 10:18 AM
The recession is here to stay. Already longer than the average recession, it will hang around through most of 2009. “It looks like (the recession) will last at least through the middle of next year,” said Wachovia Corp. Senior Economist Mark Vitner. “Probably it will bottom out then but the recovery process is likely to be very long and agonizing.”
He said that typically after a recession ends, unemployment tends to continue rising for at least a year.
“We are not likely to see a return to good economic times until late 2010 or early 201l,” he said Monday.
Florida, he said. “may take longer than the rest of the country.”
Florida’s recession started about six months earlier than the nation's recession.
University of Florida Economist David Denslow says the state’s economy started declining during the summer of 2007. The National Bureau of Economic Research said yesterday that the nation entered a recession one year ago, last December.
Denslow expects the downturn to continue through 2009. “My guess is we’ll see declining output in the first half of 2009 and essentially flat in the second half,” Denslow said Monday. Recovery, he says, may come for Florida in the first half of 2010.
Dec. 24, 2008
When will this recession end?
By Walter Derzko
When will this recession end? Are we really in a depression ? (an extended recession)? When will we get back to good times? These are questions that are on the minds of most people today, as we near the start of 2009. If you remember a year or even six months ago, many main stream economists were in denial. Many said that we should be out of this downturn by the end of 2008 or first half of 2009. It's not happening.
The Globe and Mail newspaper in Toronto two days ago featured a story called Taming the unwelcomed beast. In it, they included the following chart -A history of bear markets in US stocks (don't know why they missed 1980-81?, anyway, using their data you immediately notice a few interesting patterns. The two rows that I highlighted in red are considered Great Depressions)
A history of bear markets in U.S. stocks
Based on monthly U.S. dollar returns.
Peak-trough Months to Months to
Start End decline trough recovery
March 1876 Feb. 1879 - 33.11% 15 20
Sept. 1882 Nov. 1885 - 20.76% 21 17
Jan. 1893 Aug. 1897 - 25.12% 4 48
Sept. 1902 Nov. 1904 - 25.79% 13 13
Sept. 1906 Dec. 1908 - 33.97% 14 13
Nov. 1916 May 1919 - 27.98% 13 17
Oct. 1919 Apr. 1922 - 22.78% 22 10
Aug. 1929 Jan. 1945 - 83.41% 33 151
Nov. 1947 Oct. 1949 - 21.76% 6 35
June 1962 Apr. 1963 - 22.28% 6 10
Dec. 1968 Jan. 1972 - 31.45% 19 19
Jan. 1973 Sept. 1976 - 43.34% 21 24
Sept. 1987 July 89 - 30.21% 3 20
Sept. 2000 March 06 - 43.26% 25 42
Oct. 2007 ? ? ? ?
AVERAGE - 33.23% 15 31
Note: All returns assume full reinvestment of dividends.
In almost every case (except for 1906) the months to trough (the bottom from the previous peak) was a lot quicker then the leg back up. Months to trough range from 6 months in 1962 to 33 months in 1939.
The loss in stock value today (over 50% in S&P 500) has already outperformed each of the above bear markets except 1929, which saw a 83% drop in value and took 15 years to recover
I'd say we are closer to the 1929 example because we have a number of consecutive leveraged bubbles (close to 15 by my count) still to burst.. the next most dramatic being the commercial mortgage crisis bubble in 2009 and the start of a number of US state governments going bankrupt-watch for California to lead the pack.
The longer it drags out, the less we'll be able to deal with some of our more pressing societal problems, such as energy security, switch to alternatives, peak oii and peak gas, climate change in the form of global cooling (not global warming) and "strategic materials" and water shortages in the next 2 decades....On the upside, the recession / depression may force us to adjust and live in a zero growth sustainable economy...but I digress...back to the analysis.
On the way up, we see that the months to recovery (bottom back to the previous peak) could stretch from 10 months to 151 months (or 15 years and 4 months as we saw during World War 2.
If you add up the two columns (months to trough + months to recovery ) you get some indication of the range of when we could be out of a recession / depression (R/D) (pick your label)
Assuming that the downturn started in Oct 2007 in the USA, a 1962 like (R/D) recovery will take 16 months out from Oct 2007 or Feb 2009 (that's definitely not happening)
A mild 1906-like (R/D) recovery will take 27 months or Jan 2010
The average for the chart was 46 months or 3 years and 10 months. That puts us into Aug 2011
A more extreme (R/D) recovery will stretch us out 53 months to Feb 2012 like the recession of 1893 did or 77 months like the 2000 (R) recovery did to March 2014, just to the point where NASA says we may be feeling our first bout of global cooling due the low sun spot projections. Great ..hit us while we're down !!!
At the worst case scenario, we could mirror the 1929 depression (punctuated by the World War),which lasted 184 months or 15 years and 4 months putting us one and a half decades away, topping out in Feb 2023 ( the start of the next solar sun spot cycle minimum)
Notice that bear markets tend to cluster and get progressively worse (longer time for recovery). ie the 3 bear markets at the end of the 1800's lasted 35, 38 and 52 months respectively. The 5 bear markets before 1929 lasted 26, 27, 30, 32 and 184 months. The pre-oil shock bear markets lasted 16, 38 and 46 months and the post 73 bear markets were 23 and 77 months long.
How long will it take today’s dozen or so over-extended credit bubbles to burst and de-leverage? Your guess is as good as mine, but it won't be soon. Prepare for the long haul and watch/anticipate opportunities arising out of crisis. The best case, as far as I can see, will be a long anemic decade of no or limited GDP growth (in the US and a few more percent in China or India), financed by your individual savings or what you earn (like in my parent's days) and not unbridled credit (natural 100 year credit expansion/contraction cycle).
Walter Derzko is a futurist and business development consultant interested in strategic planning and thinking, futures research, emerging smart technologies, scenario planning, issues management, environmental scanning, opportunity recognition and lateral thinking.
Jan. 2, 2008 From Smart Money.com
When Will This Recession Finally End?
THERE'S REALLY JUST one question that matters this new year. When will the recession end?
OK, I lied. There's another question that matters even more. Will the recession ever end?
I have a lot of institutional clients who take very seriously the idea that this recession could be permanent. In their minds, it could turn out to be more like a depression. Even when we pull out of the worst of it, we'll be stuck with year after year of slow growth.
Pretty much no one thinks this recession could possibly already be over. And only a few brave souls dare to consider that it might only take another quarter or so to hit bottom. So it's just a matter of, how bad is it really?
Call me crazy, but I actually think we could all end up being pretty pleasantly surprised. I admit I was one of the last people on earth to agree we were in recession in the first place. So let me make up for that mistake: I'll be the first person to say it's over.
I don't mean to get carried away on wings of optimism here. But there really are some hopeful signs. Some of the same symptoms that, earlier this year, gave us an early warning that recession was lurking are now pointing in a more hopeful direction.
Let's remember what caused this recession in the first place. It started out as just a slowdown. But then over the summer, one by one, giant financial firms blew up -- not without a little help from some particularly incompetent government interventions. By the end of September, with Bear Stearns, Fannie Mae (FNM: 0.73, -0.03, -3.94%), Freddie Mac (FRE: 0.73, +0.00, +0.00%), Lehman Brothers, Merrill Lynch, AIG, Washington Mutual and Wachovia all in the graveyard, or at least on the embalming table, the global economy suddenly hit the brakes.
It's been three months now since all that happened. In case you haven't noticed, giant financial firms have stopped blowing up. Or at least when they threaten to now, the feds step in and kiss their boo-boos and makes everything good again. In late November, Citigroup (C: 7.14, +0.43, +6.40%) was rescued by the Treasury Department and the Federal Reserve. In December, it was the Big Three auto makers, and critically, General Motors' (GM: 3.65, +0.45, +14.06%) GMAC financing arm.
So suddenly markets have stopped going down. In fact they've started going up. Oh sure, after a catastrophe like we had during most of 2008, the rally in stocks off the November bottom doesn't mean all is forgiven. But emotions aside, the reality is that from the November nadir stocks, on average, are up something like 20% now. By most reckonings that's a whole bull market. But I can understand why nobody is particularly thrilled about it.
At the same time, the volatility of stock prices has started to come down. We haven't had one of those awful stomach-churning days where stocks swing as much as 10% in a single trading session for quite a while now. There are still too many moves bigger than 1% in a single day, but at this point that feels like nothing. And it is an improvement.
There are some important signals along the same lines coming from bond markets. The extremely high yields on corporate bonds have started to come down, indicating that investors no longer think they need extraordinary interest rates to compensate for lots of expected defaults.
And in credit markets, closely watched indicators of default risk such as the TED-spread, the swap spread and the price of credit default swaps have all relaxed considerably over the last few weeks.
None of that means we're out of recession. I'm not saying that bedrock indicators of economic vitality, such as payroll jobs growth, are going to instantly turn away from the Dark Side of the Force. But it means that the thing that caused the recession -- the collapse of the world banking system -- is no longer causing the recession. As an issue, it's now on the sidelines, which means the economy can begin to heal the way it always does.
Don't worry that we're now in a vicious cycle in which consumers will stop spending and borrowing, and will become "scrimp and save" misers -- which would lead to slower growth, few jobs, more scrimping and more saving, and so on until the economy utterly grinds to a halt and we all starve. That's not going to happen.
Remember, as soon as one person decides to stop consuming and start saving, that person's money needs to be invested somehow. And ultimately it's investment that leads to long-term growth.
How often over the last 10 years have you heard that Americans don't save enough? That we're going to starve investment and growth because all we do is consume? Now the same people who've been saying that all this time are saying that we face a permanent recession because consumers will save. Huh? How can the economy be doomed when consumers don't save, and also when they do save?
That's the kind of silly thing that people are taking seriously now. And why not? We've all been through hell the last year. Show me someone who didn't lose money last year and I'll show you a liar.
So everyone is willing to believe the worst, even if it doesn't make sense. I could make a contrarian argument that all this negative sentiment is, in itself, enough to make a credible case that we've seen the worst. Maybe that's true, but it can still take a while for a big, complex machine like our economy to recover once it's been as damaged as it was last year.
But markets are another matter. When stocks have gone down enough to cover the worst-case scenario, then even if the recession drags on longer than I expect you can still make money. Suppose you bought stocks in 1932. The Great Depression went on for many years after that. But you made money on stocks from the get-go.
So let's approach this new year with at least an open mind. Stocks are cheap, that's for sure. And there are signs of healing in the credit markets, and that's the key prerequisite for economic recovery. So don't blind yourself to the opportunities that may be out there.
Donald Luskin is chief investment officer of Trend Macrolytics, an economics consulting firm serving institutional investors. You may contact him at don@trendmacro.com.
Jan. 3, 2009
Papademos Says ECB to ‘Act Appropriately’ in Slowdown (Update2)
By Simon Kennedy
(Bloomberg) -- European Central Bank Vice President Lucas Papademos said an economic recovery may not begin until next year and that policy makers have the scope to cut interest rates if inflation slows further.
“The economic outlook is unusually uncertain,” Papademos said in an interview with Germany’s WirtschaftsWoche magazine published today. “It is quite possible that the recovery will not start until the beginning of 2010.”
Having reduced their key interest rate by 175 basis points since early October to 2.5 percent, ECB policy makers enter the new year under pressure to cut more deeply amid Europe’s first recession in 15 years. Retail sales fell for a seventh month in December, manufacturing shrank at a record pace and lending to the private sector stagnated, reports showed this past week.
The economy may be even weaker in 2009 than the ECB’s prediction of last month for a contraction of about 0.5 percent, Papademos said. The Frankfurt-based central bank will “act appropriately” and has room to do so if the slowdown threatens price stability, which the ECB defines as inflation just below 2 percent in the medium term, he said.
“If, in our assessment, the risks to price stability change further in the coming months, monetary policy could be eased further and we will act appropriately,” Papademos said.
March 7, 2008
If Recession Is Now Here, When Is It Going to End?
By: Reuters | 07 Mar 2008 | 02:48 PM ET
A second straight month of job losses all but ended the debate over whether the US economy has slipped into recession. Now the question is how to get out.
"Turn out the lights. The party's over. We are in a recession," said Joseph Brusuelas, chief U.S. economist at IDEA global in New York.
Don't count on debt-laden households to spend their way back to growth. As for banks, they are preoccupied with cleaning up their balance sheets after seven months of credit turmoil, which means they are unlikely to throw open the cash spigots. The federal government is mired in debt as well.
All that adds up to a protracted period of deleveraging -- a fancy word for paring debt -- and perhaps an equally long period of subpar U.S. economic growth.
While most economists still believe that the economy will rebound in the second half of this year as U.S. Federal Reserve interest rate cuts and government tax rebates kick in, some are starting to push back the recovery date into 2009.
U.S. employers cut 63,000 jobs last month, according to Labor Department data released Friday. That followed a loss of 22,000 jobs in January. December's job growth was only half as big as the government had earlier reported.
Economists even found bad news in the fact that the unemployment rate fell to 4.8 percent from 4.9 percent, noting that this was merely the result of a steep drop in the size of the work force because more people gave up looking for jobs.
Employment holds the key to the U.S. economy because jobs mean paychecks, paychecks mean consumer spending, and spending accounts for about 70 percent of the economy.
"The debate should no longer be about whether there is or is not a recession, only about how deep it will be," said Nigel Gault, chief U.S. economist with Global Insight in Lexington, Massachusetts.
Consumers were already under strain from the slumping housing market and rising costs for food and energy. A report Thursday showed that household net wealth fell for the first time in five years. The savings rate has hovered around zero for several months.
With credit market turmoil prompting banks to tighten lending standards, consumers have had a tougher time qualifying for cheap mortgages, auto loans and home equity lines. That suggests households will cut spending.
Later on Friday, the Federal Reserve will release data on consumer borrowings and interest rates for January. Borrowings had been on an upswing for much of 2007 but the growth rate abruptly slowed in December, heightening concerns that consumers may be tapped out.
The White House acknowledged that the U.S. economy was stuck in a period of "low growth", and pointed to a recently passed $168 billion stimulus package as a way to address it.
Lehman Brothers economist Ethan Harris said the rebate checks would not be enough to prop up the economy.
"We now believe the tax rebate checks will arrive too late to prevent an outright recession," he said, adding that he expected the economy to dip into negative territory in the first and second quarters of the year.
"While we are penciling in a very mild recession, it is important to not get hung up on the 'recession, no recession' debate. The more fundamental point is that the economy is likely to experience an extended period of very weak growth, a rising unemployment rate and significant further Fed rate cuts."
The best hope for the federal stimulus package may be a less-discussed provision that gives companies a tax incentive to make purchases this year. That may boost corporate spending, cushioning the downturn.
There was one small silver lining in the ugly employment report. A sluggish labor market eases inflation pressures, making it easier for the Fed to lower interest rates.
The central bank has already cut rates by 2.25 percentage points since mid-September, and another cut of at least a half-point is widely expected when its policy team meets on March 18. Goldman Sachs economist Jan Hatzius said an emergency rate cut before that meeting was not out of the question.
J.P. Morgan's chief economist, Bruce Kasman, said he expects the Fed to cut by three-quarters of a point at the March meeting, and another half point in April.
"It is appropriate to characterize the U.S. economy as having entered a recession in the first quarter," he said.
Nov. 5, 2008
When Will The US Recession End?
By Brian Kelly on November 5, 2008
Now that the election is over, President-elect Obama has a tough economic road ahead. The advanced GDP report of -0.3% suggests that the US is in a recession. The $64,000 question is how long will the recession last. An examination of a few economic forecasting tools gives an approximation of when then recession began and likely end points.
A widely used index of economic activity is the Chicago Fed National Activity Index (CFNAI). The index is released monthly and is a weighted average of 85 indicators of economic activity. Since the index is calculated using monthly data it can be used as a leading indicator for quarterly GDP. The foll0wing chart shows the CFNAI since 1967 with recessions in red.
The Chicago Fed produces two indexes, a monthly index and a 3 month moving average of the monthly index. The 3 month moving average index smooths any volatility in monthly numbers and is used for economic forecasting.
A zero value for the 3 month CFNAI indicates that the economy is expanding at rate of growth that is consistent with its historical trend. An index reading below -0.70 following a period of expansion indicates that a recession may have started. A reading above 0.70 two years into an economic expansion indicates increased probability that a sustained inflationary period has begun.
The 3 month CFNAI crossed below -0.70 in December of 2007 and is therefore the likely start date of the current recession. According to the NBER, since 1967 there have been6 recessions. The longest recessions lasted 16 months and occurred from November 1973 to March 1975 and July 1981 to November 1982. The shortest recession started in January 1980 and ended in July 1980, for a total of 6 months. The average recession lasted for 10.8 months.
Using the NBER figures and a start date of December 2007, the following recession window can be interpolated:
Recession Start Date: December 2007 Possible Recession End Dates
Long Recession: 16 months April 2009
Short Recession: 6 months May 2008
Average Recession: 10.8 months mid-November 2008
From this table it is clear that the US will not experience a short recession since that would have been completed in May of 2008. The most recent advance GDP report of -0.3% suggests that the recession may not end in mid-November 2008. The only end date left is a long recession with a potential end date of April 2009.
The start date of the recession is consistent with Federal Reserve models of the probability of recession. In a 2006 report, Jonathan Wright a Fed researcher, developed a model for predicting the probability of a recession using the Treasury yield curve. The model developed used the 10 year - 3 month spread and the effective fed funds rate.
The Federal Reserve Bank of Philadelphia also publishes the probabilities of a recession in its Survey of Professional Forecasters (SPF) report. This data goes back to 1968 and shows the probability of a recession occurring in the next quarter. (Recession in red)
With this series it appears that 40% probability is the critical level in predicting a decline in GDP in the next quarter. Interestingly, the probabilities breached the 40% level in the first quarter of 2008. While not an exact match with Wright’s Model B or the CFNAI data it is fairly close and can serve as additional evidence that the current recession began near the end of 2007 and the beginning of 2008.
After falling below 40% for one quarter, the Anxious Index breached the 40% probability mark again in the 3rd quarter of 2008. This suggests that forecasters are expecting a decline in GDP for at least one more quarter. This projection means that the recession will last until March 2009 which is consistent with the long recession projection of April 2009.
The next CFNAI report will be released on November 24th and could provide clues as to the duration of the economic malaise. As well, watching the 10 year - 3 month spread and effective rates will be of utmost importance.
Nov. 6, 2008
Economist: Recession will end, but not for a while
by Brad Carlson
The U.S. economy will recover eventually, in part because of recent federal government intervention in the financial sector, said Quincy Krosby, chief investment strategist for The Hartford. “Even if the government gets 50 percent of it right, we will get through this,” she said in a keynote address at the Nampa Chamber of Commerce annual economic outlook breakfast Nov. 6. Andy Dodson’s Edward Jones Investments office hosted the event at Nampa Civic Center. Krosby said the U.S. economy “is in recession and will continue to be in recession before we see the sunlight. ”The economy must deal with collateral damage from the collapse of the subprime mortgage market, now “unwinding” into many sectors, she said. Unemployment will keep rising, and businesses will keep delaying capital expenditures until operators gain confidence in the economy, she said. Credit markets remain tight for businesses of all sizes, and consumers are spending less, she said. The current downturn could last 14 to 16 months, depending on when it started officially, compared to the average recession of about 10 months, Krosby said.
Unemployment could hit 7.5 percent or 8 percent in the U.S., she said. “What they’re trying to do is keep the damage to a minimum, but unfortunately we have been hit and hit and hit,” she said. The Hartford had expected the U.S. to skirt recession despite the high oil prices seen for much of this year, but the credit-market freeze had huge impacts, Krosby said. Banks must continue to clear their books of houses and non-performing mortgages, she said. Problems with subprime mortgages and with excess housing inventories could have been confined to local economies and resolved fairly quickly if the banks had kept the mortgages on their books, she said. Wall Street investors bought the mortgages and demanded more of them as a way to create bonds that paid higher yields – a key reason that the subprime mortgage problem’s impacts spread throughout the economy, she said. Federal investment in money-center banks aims to make sure the banks remain strong and to keep customers confident that the banks will be there long-term – even if they remain tight with credit now, Krosby said. “Confidence has been the missing factor for so long,” she said. She added: “The good news is we get through this, and pent-up demand is going to be created.”
Nov. 14, 2008
Colleges, Take Note: The Recession Will End on August 3, 2010
New York — Predictions of the next turn in this financial crisis are worth, well, little more than the predictions that led us to this point, but that still doesn’t stop economists from looking into the crystal ball.
That’s what Mark M. Zandi, chief economist and co-founder of Economy.com, did on Thursday during a luncheon speech to a group of college money types at a conference held here by Moody’s Investors Service and The Chronicle.
His prediction on when the recession will end? August 3, 2010, he said to a few laughs for naming such a specific date. Of course, he admitted that he didn’t know exactly which day the recession would end, but he was confident that the downturn would be “more severe than any recession” since the Great Depression.
“We are going to be less wealthy for a long time,” said Mr. Zandi, author of Financial Shock: A 360º Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis.
The next six months, he said, are going to be “very painful.” The following six months will be just “painful,” as house prices begin to stabilize in the summer of 2009. The subsequent six months will be “comfortable,” before the country begins to emerge from the crisis in 2010.
Despite painting such a bleak picture, Mr. Zandi said he had three reasons for optimism. One: House prices will begin to stabilize in the middle of 2009. Two: Gas prices are falling. Three: The federal government will provide some sort of stimulus package in the coming months. “The government will be the only institution to get us out of this mess,” he said. —Jeffrey J. Selingo
Dec. 1, 2008
When Will It End?
by Zubin Jelveh Dec 1 2008
Okay, fine. Economists made it official: We're in a recession. Deeply. When might it end?
As if you didn't know yet, the United States is in a recession. The nation's business cycle tracker, the National Bureau of Economic Research in Cambridge, Massachusetts, announced anticlimactically today that economic activity peaked in December of 2007, right around the time employment numbers started to head south and four months after the start of the credit crunch. The Bush expansion—as it may come to be known—does not stack up well against the Clinton boom of the 1990s on many measures. For one, the economy grew for 120 straight months in the 1990s versus 73 this decade. Incomes also grew under Clinton while they remained stagnant under Bush. Gross domestic product per capita, a rough measure of living standards, grew by 51 percent during the tech boom under Clinton versus 33 percent during the real estate boom under Bush II. (But if you compare the average monthly gain in G.D.P.-per-capita, Bush squeaks out a win: 0.45 percent versus 0.42 percent.) But the main question on everyone's mind now is when will our bust come to an end? If you look at the yield curve, historically a very reliable indicator of swings in the business cycle, activity should pick up by the end of 2009. That would mean that the recession will be longer than many professional economists are forecasting. Which shouldn't be a surprise to anyone, considering what a bad job forecasters did with predicting this recession.
Another recent reliable indicator is actually the N.B.E.R. recession announcement itself. During the two previous downturns, in 1990 and 2001, the N.B.E.R. made its recession call after the actual downturn had ended. Unfortunately, a global financial disaster makes the chances of that good fortune happening this time around close to zero. In fact, November marks the eleventh month of the current retrenchment, beating the average length of post-World War II recessions by one month. And if the recession lasts past April, it'll be the longest downturn since the Great Depression. With the N.B.E.R.'s announcement, the U.S. joins a growing group of rich countries that are also in official recessions—a list that includes Japan, New Zealand, and the 15 countries of the euro zone.
Dec. 2, 2008
The recession: When will it end?
Posted by Harriet Brackey on December 2, 2008 at 10:18 AM
The recession is here to stay. Already longer than the average recession, it will hang around through most of 2009. “It looks like (the recession) will last at least through the middle of next year,” said Wachovia Corp. Senior Economist Mark Vitner. “Probably it will bottom out then but the recovery process is likely to be very long and agonizing.”
He said that typically after a recession ends, unemployment tends to continue rising for at least a year.
“We are not likely to see a return to good economic times until late 2010 or early 201l,” he said Monday.
Florida, he said. “may take longer than the rest of the country.”
Florida’s recession started about six months earlier than the nation's recession.
University of Florida Economist David Denslow says the state’s economy started declining during the summer of 2007. The National Bureau of Economic Research said yesterday that the nation entered a recession one year ago, last December.
Denslow expects the downturn to continue through 2009. “My guess is we’ll see declining output in the first half of 2009 and essentially flat in the second half,” Denslow said Monday. Recovery, he says, may come for Florida in the first half of 2010.
Dec. 24, 2008
When will this recession end?
By Walter Derzko
When will this recession end? Are we really in a depression ? (an extended recession)? When will we get back to good times? These are questions that are on the minds of most people today, as we near the start of 2009. If you remember a year or even six months ago, many main stream economists were in denial. Many said that we should be out of this downturn by the end of 2008 or first half of 2009. It's not happening.
The Globe and Mail newspaper in Toronto two days ago featured a story called Taming the unwelcomed beast. In it, they included the following chart -A history of bear markets in US stocks (don't know why they missed 1980-81?, anyway, using their data you immediately notice a few interesting patterns. The two rows that I highlighted in red are considered Great Depressions)
A history of bear markets in U.S. stocks
Based on monthly U.S. dollar returns.
Peak-trough Months to Months to
Start End decline trough recovery
March 1876 Feb. 1879 - 33.11% 15 20
Sept. 1882 Nov. 1885 - 20.76% 21 17
Jan. 1893 Aug. 1897 - 25.12% 4 48
Sept. 1902 Nov. 1904 - 25.79% 13 13
Sept. 1906 Dec. 1908 - 33.97% 14 13
Nov. 1916 May 1919 - 27.98% 13 17
Oct. 1919 Apr. 1922 - 22.78% 22 10
Aug. 1929 Jan. 1945 - 83.41% 33 151
Nov. 1947 Oct. 1949 - 21.76% 6 35
June 1962 Apr. 1963 - 22.28% 6 10
Dec. 1968 Jan. 1972 - 31.45% 19 19
Jan. 1973 Sept. 1976 - 43.34% 21 24
Sept. 1987 July 89 - 30.21% 3 20
Sept. 2000 March 06 - 43.26% 25 42
Oct. 2007 ? ? ? ?
AVERAGE - 33.23% 15 31
Note: All returns assume full reinvestment of dividends.
In almost every case (except for 1906) the months to trough (the bottom from the previous peak) was a lot quicker then the leg back up. Months to trough range from 6 months in 1962 to 33 months in 1939.
The loss in stock value today (over 50% in S&P 500) has already outperformed each of the above bear markets except 1929, which saw a 83% drop in value and took 15 years to recover
I'd say we are closer to the 1929 example because we have a number of consecutive leveraged bubbles (close to 15 by my count) still to burst.. the next most dramatic being the commercial mortgage crisis bubble in 2009 and the start of a number of US state governments going bankrupt-watch for California to lead the pack.
The longer it drags out, the less we'll be able to deal with some of our more pressing societal problems, such as energy security, switch to alternatives, peak oii and peak gas, climate change in the form of global cooling (not global warming) and "strategic materials" and water shortages in the next 2 decades....On the upside, the recession / depression may force us to adjust and live in a zero growth sustainable economy...but I digress...back to the analysis.
On the way up, we see that the months to recovery (bottom back to the previous peak) could stretch from 10 months to 151 months (or 15 years and 4 months as we saw during World War 2.
If you add up the two columns (months to trough + months to recovery ) you get some indication of the range of when we could be out of a recession / depression (R/D) (pick your label)
Assuming that the downturn started in Oct 2007 in the USA, a 1962 like (R/D) recovery will take 16 months out from Oct 2007 or Feb 2009 (that's definitely not happening)
A mild 1906-like (R/D) recovery will take 27 months or Jan 2010
The average for the chart was 46 months or 3 years and 10 months. That puts us into Aug 2011
A more extreme (R/D) recovery will stretch us out 53 months to Feb 2012 like the recession of 1893 did or 77 months like the 2000 (R) recovery did to March 2014, just to the point where NASA says we may be feeling our first bout of global cooling due the low sun spot projections. Great ..hit us while we're down !!!
At the worst case scenario, we could mirror the 1929 depression (punctuated by the World War),which lasted 184 months or 15 years and 4 months putting us one and a half decades away, topping out in Feb 2023 ( the start of the next solar sun spot cycle minimum)
Notice that bear markets tend to cluster and get progressively worse (longer time for recovery). ie the 3 bear markets at the end of the 1800's lasted 35, 38 and 52 months respectively. The 5 bear markets before 1929 lasted 26, 27, 30, 32 and 184 months. The pre-oil shock bear markets lasted 16, 38 and 46 months and the post 73 bear markets were 23 and 77 months long.
How long will it take today’s dozen or so over-extended credit bubbles to burst and de-leverage? Your guess is as good as mine, but it won't be soon. Prepare for the long haul and watch/anticipate opportunities arising out of crisis. The best case, as far as I can see, will be a long anemic decade of no or limited GDP growth (in the US and a few more percent in China or India), financed by your individual savings or what you earn (like in my parent's days) and not unbridled credit (natural 100 year credit expansion/contraction cycle).
Walter Derzko is a futurist and business development consultant interested in strategic planning and thinking, futures research, emerging smart technologies, scenario planning, issues management, environmental scanning, opportunity recognition and lateral thinking.
Jan. 2, 2008 From Smart Money.com
When Will This Recession Finally End?
THERE'S REALLY JUST one question that matters this new year. When will the recession end?
OK, I lied. There's another question that matters even more. Will the recession ever end?
I have a lot of institutional clients who take very seriously the idea that this recession could be permanent. In their minds, it could turn out to be more like a depression. Even when we pull out of the worst of it, we'll be stuck with year after year of slow growth.
Pretty much no one thinks this recession could possibly already be over. And only a few brave souls dare to consider that it might only take another quarter or so to hit bottom. So it's just a matter of, how bad is it really?
Call me crazy, but I actually think we could all end up being pretty pleasantly surprised. I admit I was one of the last people on earth to agree we were in recession in the first place. So let me make up for that mistake: I'll be the first person to say it's over.
I don't mean to get carried away on wings of optimism here. But there really are some hopeful signs. Some of the same symptoms that, earlier this year, gave us an early warning that recession was lurking are now pointing in a more hopeful direction.
Let's remember what caused this recession in the first place. It started out as just a slowdown. But then over the summer, one by one, giant financial firms blew up -- not without a little help from some particularly incompetent government interventions. By the end of September, with Bear Stearns, Fannie Mae (FNM: 0.73, -0.03, -3.94%), Freddie Mac (FRE: 0.73, +0.00, +0.00%), Lehman Brothers, Merrill Lynch, AIG, Washington Mutual and Wachovia all in the graveyard, or at least on the embalming table, the global economy suddenly hit the brakes.
It's been three months now since all that happened. In case you haven't noticed, giant financial firms have stopped blowing up. Or at least when they threaten to now, the feds step in and kiss their boo-boos and makes everything good again. In late November, Citigroup (C: 7.14, +0.43, +6.40%) was rescued by the Treasury Department and the Federal Reserve. In December, it was the Big Three auto makers, and critically, General Motors' (GM: 3.65, +0.45, +14.06%) GMAC financing arm.
So suddenly markets have stopped going down. In fact they've started going up. Oh sure, after a catastrophe like we had during most of 2008, the rally in stocks off the November bottom doesn't mean all is forgiven. But emotions aside, the reality is that from the November nadir stocks, on average, are up something like 20% now. By most reckonings that's a whole bull market. But I can understand why nobody is particularly thrilled about it.
At the same time, the volatility of stock prices has started to come down. We haven't had one of those awful stomach-churning days where stocks swing as much as 10% in a single trading session for quite a while now. There are still too many moves bigger than 1% in a single day, but at this point that feels like nothing. And it is an improvement.
There are some important signals along the same lines coming from bond markets. The extremely high yields on corporate bonds have started to come down, indicating that investors no longer think they need extraordinary interest rates to compensate for lots of expected defaults.
And in credit markets, closely watched indicators of default risk such as the TED-spread, the swap spread and the price of credit default swaps have all relaxed considerably over the last few weeks.
None of that means we're out of recession. I'm not saying that bedrock indicators of economic vitality, such as payroll jobs growth, are going to instantly turn away from the Dark Side of the Force. But it means that the thing that caused the recession -- the collapse of the world banking system -- is no longer causing the recession. As an issue, it's now on the sidelines, which means the economy can begin to heal the way it always does.
Don't worry that we're now in a vicious cycle in which consumers will stop spending and borrowing, and will become "scrimp and save" misers -- which would lead to slower growth, few jobs, more scrimping and more saving, and so on until the economy utterly grinds to a halt and we all starve. That's not going to happen.
Remember, as soon as one person decides to stop consuming and start saving, that person's money needs to be invested somehow. And ultimately it's investment that leads to long-term growth.
How often over the last 10 years have you heard that Americans don't save enough? That we're going to starve investment and growth because all we do is consume? Now the same people who've been saying that all this time are saying that we face a permanent recession because consumers will save. Huh? How can the economy be doomed when consumers don't save, and also when they do save?
That's the kind of silly thing that people are taking seriously now. And why not? We've all been through hell the last year. Show me someone who didn't lose money last year and I'll show you a liar.
So everyone is willing to believe the worst, even if it doesn't make sense. I could make a contrarian argument that all this negative sentiment is, in itself, enough to make a credible case that we've seen the worst. Maybe that's true, but it can still take a while for a big, complex machine like our economy to recover once it's been as damaged as it was last year.
But markets are another matter. When stocks have gone down enough to cover the worst-case scenario, then even if the recession drags on longer than I expect you can still make money. Suppose you bought stocks in 1932. The Great Depression went on for many years after that. But you made money on stocks from the get-go.
So let's approach this new year with at least an open mind. Stocks are cheap, that's for sure. And there are signs of healing in the credit markets, and that's the key prerequisite for economic recovery. So don't blind yourself to the opportunities that may be out there.
Donald Luskin is chief investment officer of Trend Macrolytics, an economics consulting firm serving institutional investors. You may contact him at don@trendmacro.com.
Jan. 3, 2009
Papademos Says ECB to ‘Act Appropriately’ in Slowdown (Update2)
By Simon Kennedy
(Bloomberg) -- European Central Bank Vice President Lucas Papademos said an economic recovery may not begin until next year and that policy makers have the scope to cut interest rates if inflation slows further.
“The economic outlook is unusually uncertain,” Papademos said in an interview with Germany’s WirtschaftsWoche magazine published today. “It is quite possible that the recovery will not start until the beginning of 2010.”
Having reduced their key interest rate by 175 basis points since early October to 2.5 percent, ECB policy makers enter the new year under pressure to cut more deeply amid Europe’s first recession in 15 years. Retail sales fell for a seventh month in December, manufacturing shrank at a record pace and lending to the private sector stagnated, reports showed this past week.
The economy may be even weaker in 2009 than the ECB’s prediction of last month for a contraction of about 0.5 percent, Papademos said. The Frankfurt-based central bank will “act appropriately” and has room to do so if the slowdown threatens price stability, which the ECB defines as inflation just below 2 percent in the medium term, he said.
“If, in our assessment, the risks to price stability change further in the coming months, monetary policy could be eased further and we will act appropriately,” Papademos said.
Labels: articles, collection of opinions, Recession ends
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