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» Jas_Jain - The last Shoe to Drop, Employment, CONFIRMS Recession
March 09, 2008
The last Shoe to Drop, Employment, CONFIRMS Recession
Employment is known to be lagging-to-coincident indicator of the economy. Hence, it cannot be used to forecast recessions, but it is by far the best confirmatory signal of economy being in recession.
Here is what Guru Lakshman Achuthan of ECRI had to say:
December 2007: "Any two months in a row of negative job growth -- meaning there were job losses -- is usually the key indicator that a recession is around the corner, asserts Lakshman Achuthan, of the ECRI, a private organization that keeps the most intensive watch over all statistical indicators of the economy."
January 2004: "But Achuthan of ECRI said he worried that focusing on GDP could give less importance to a critical sector of the economy -- the job market. Moore and other founding members of the NBER committee focused on jobs, he said, because they often influence the other indicators -- if unemployment is rising, then incomes, output and sales typically fall, as well. 'That vicious cycle is the definition of a recession, and that's why it's important that the definition of a recession captures that cycle, 'Achuthan said. 'GDP alone doesn't do that.'"
OK, let us look at the recent Non-farm Employment (000):
Month Change
Dec-07 +41
Jan-08 -22
Feb-08 -63
3-Month Total = -44
And here is the historical fact:
Since 1960, When the 3-Month Total Went Below ZERO (After the Full Recovery) The Economy Was Already In Recession For 2-11 Months.
First, Guru Lakshman ignored his own indicator, WLI, which is shouting that the economy is already in recession, and now he is ignoring "a critical sector of the economy -- the job market." He has proven himself to be a pompous self-promoter and only his cult followers still rely on him for the recession forecast. There is nothing to forecast when something has already taken place. Please see the attached graphs for graphic conformations.
My forecast: The recession began in November 2007. I cannot overemphasize how important it is to figure out if the us economy is in recession or not and if yes since when.
Jas
-- posted by Jas_Jain
» BANANAS_ - ECRI's Rogue Economist Says That Economy Is In RECESSION
In response to ECRI's Rogue Economist Says That Economy Is In RECESSION posted by Jas_Jain:
ECONOMY, YOU'RE SO RECESSION?
The National Bureau of Economic Research (NBER) is the official arbiter of business cycle peaks and troughs. They are the organization that pin-points the month of turning points in the business cycle. The last recession, according to NBER, started in 3/01 and ended in 11/01. But what do they mean by recession?
"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."
NBER seems to prefer two or more consecutive quarters of negative GDP. However, this negativity needs to have depth, duration and diffusion: "Our procedure differs from the two-quarter rule in a number of ways. First, we consider the depth as well as the duration of the decline in economic activity. Recall that our definition includes the phrase, "a significant decline in economic activity." Second, we use a broader array of indicators than just real GDP. One reason for this is that the GDP data are subject to considerable revision. Third, we use monthly indicators to arrive at a monthly chronology."
Negative GDP growth is not necessarily a reliable indicator of recession. "On July 31, 2002, the Bureau of Economic Analysis released revised figures for gross domestic product that showed three quarters of negative growth in 2001-quarters 1, 2 and 3- where previously the data had shown only quarter 3 as negative. This revision shows why the committee does not rely on a simple rule of thumb such as two consecutive quarters of negative growth, nor relies on GDP data alone, in making its determinations, but rather looks at a broader array of statistics. In November 2001, the committee determined the date of the peak in activity in March 2001 using its normal indicators."
The Business Cycle Dating Commitee of NBER places emphasis on four indicators, which make up the Conference Board's index of Coincident Economic Indicators. "The committee places particular emphasis on two monthly measures of activity across the entire economy: (1) personal income less transfer payments, in real terms and (2) employment. In addition, the committee refers to two indicators with coverage primarily of manufacturing and goods: (3) industrial production and (4) the volume of sales of the manufacturing and wholesale retail sectors adjusted for price changes."
Are we in a recession? The following data series is from the Conference Board's monthly index of Coincident Economic Indicators from June of '06 to February of '08:
122
122.2
122.5
122.6
123
123
123.4
123.3
123.5
123.8
124
124.1
124.3
124.7
124.9
125
125.1
124.9
124.9
124.9
124.9
The growth rate of this data series right now is +1.2%. I should note that this growth rate has been falling for the last 4 months. Although, looking at the latest trend of this series, it appears the economy as of the end of February of '08 has NOT slipped into a recession.
I find it interesting, with the trend of the index of Coincident Economic Indicators in mind, that Martin Feldstein, the president of NBER and a member of the Business Cycle Dating Committee, declares that we are in a recession. He's obviously in a position to make such a declaration.
If Mr. Feldstein is correct, then why hasn't the index turned decisively south? Maybe the data put out by the Conference Board doesn't accurately reflect the state of our business cycle. We shall see.
-- posted by BANANAS_
» Jas_Jain - ECRI's Rogue Economist Says That Economy Is In RECESSION
In response to ECRI's Rogue Economist Says That Economy Is In RECESSION posted by BANANAS_:
--
You conveniently ignore CB's LEI that has been screaming recession for some time. There are lots of lags in the data and recession deniers make a lot of hay out of some.
Jas
-- posted by Jas_Jain
» BANANAS_ - ECRI's Rogue Economist Says That Economy Is In RECESSION
In response to ECRI's Rogue Economist Says That Economy Is In RECESSION posted by Jas_Jain:
I didn't leave out the Conference Board's index of Leading Economic Indicators because of convenience. The LEI leads the index of Coincident Economic Indicators by an average of 9 months. The topic of my argument was asking the question if we are CURRENTLY in a recession. As of the end of February, my answer is "NOT!".
I will say this about LEI: It's growth has recently become clearly negative (depth). A downward trend in the LEI index has been taking shape for 6 months (duration). Six out of the 10 components either have negative growth or declining positive growth. One other indicator, the interest rate spread, is now positive. However, since it has a relatively large lead time, it's distant past negative interest rate spread has more relevance than the current one. So, if you add this last one to the above six, then we have seven out of ten indicators starting to show widespread weakness in the economy (diffusion).
It's becoming more apparent that a recession is imminent. The three d's (depth, duration and diffusion) are becoming more pronounced. I still would like to see one more month of Conference Board data to confirm whether or not a recession is "baked in the cake".
And if next month confirms, Jas, you can have that cake and eat it, too. :-)
-- posted by BANANAS_
» Jas_Jain - Re: ECRI's Rogue Economist Says That Economy Is In RECESSION
In response to ECRI's Rogue Economist Says That Economy Is In RECESSION posted by BANANAS_:
--
BANNANAS,
Let me be very clear and concise for you: The recession began in November 2007.
Jas
-- posted by Jas_Jain
» BANANAS_ - Re: ECRI's Rogue Economist Says That Economy Is In RECESSION
In response to Re: ECRI's Rogue Economist Says That Economy Is In RECESSION posted by Jas_Jain:
"Let me be very clear and concise for you: The recession began in November 2007." - Jas
No contraction in the business cycle for Q4 of 2007. The U.S. Commerce Department's Bureau of Economic Analysis confirmed that today.
"Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 0.6 percent in the fourth quarter of 2007, according to final estimates released by the Bureau of Economic Analysis."
-- posted by BANANAS_
» Jas_Jain - CNBC Exposes Greenspan’s Lie On Recession Call
--
CNBC Exposes Greenspan's Lie On Recession Call
David Rosenberg; 04/08/08:
"Greenspan raises recession odds to over 50% -- Former FOMC Chairman Alan Greenspan isn't ready to lay down the recession call like Feldstein. We heard him over the weekend saying the following: "we would have to have to see signs of this intensification: there are some, but not many yet ... Therefore, I would not describe the situation we are in as a recession, although the chances that we'll have one are more than 50%.""
This morning CNBC said that on Monday Greenspan was talking about recession risk in terms of 50% (see above) and on Tuesday interview with Money Honey (Maria) he said that the economy was in the throws of a recession.
Over the past 5 months Greenspan has gone from "1/3rd," to "fifty-fifty" to "less than 50-50" to "more than 50%" to "the economy was in the throws of a recession." The economy has been IN RECESSION during all this time. When 10-year Treasuries were trading at 5% the "maestro" said that the yield would go to 8%. It is at 3.5% and headed towards 2%. Bernanke's forecasting ability isn't much better.
Greenspan is not only a liar but also a certifiable evildoer based on his recommendation to family-and-friends of - "Debt is bad. Pay it as quickly as you can." - to pushing debt on American households as never before in US history. The three evildoers - Greenspan, Bush and Bernanke - engaged in the evil deed of pushing debt with their policies for personal gain (hold on power).
Americans are having difficulty in coming to terms with the fact that they have been, and ARE, being led by evildoers.
Jas
-- posted by Jas_Jain
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