There was a good piece in Sunday’s NY Times detailing the outlook from Lakshman Achuthan of the ECRI. Achuthan has been fairly vocal about his call that the US economy is definitely entering a new recession. And his calls are worth noting as the ECRI hasn’t made a single incorrect recession call in the last 15 years (granted, that’s not a confidence inspiring data set, but as far as economic forecasts go, let’s just agree that the ECRI has been better than most). The article adds some details to his current outlook:
“In the institute’s view, the United States, which is struggling to recover from the last downturn, is lurching into a new one. “If the United States isn’t already in a recession now it’s about to enter one,” says Lakshman Achuthan, the institute’s chief operations officer.
It’s just a forecast. But if it’s borne out, the timing will be brutal, and not just for portfolio managers and incumbent politicians. Millions of people who lost their jobs in the 2008-9 recession are still out of work. And the unemployment rate in the United States remained at 9.1 percent in September.
More pain is coming, says Mr. Achuthan. He thinks the unemployment rate will certainly go higher. “I wouldn’t be surprised if it goes back up into double digits,” he says.”
Mr. Achuthan, on the other hand, says that the gross domestic product rate is likely to go negative by the first quarter of 2012, if not sooner. He told me last week that he couldn’t tell exactly when the recession would start — or whether it had already begun. The institute made its recession call only after an array of economic indicators showed a “pronounced, pervasive and persistent” downturn consistent with a recession, he says. By contrast, in the summer of 2010, when some market bears interpreted the decline in one of the institute’s indexes as a signal that a recession was in the offing, the institute said the pattern pointed not to recession, but only to weakness.
Now, he says, the pattern is clear.
This time, Mr. Achuthan says, a host of leading and coincident indexes — those that suggest activity down the road, and those that measure current movements —are all pointing strongly toward recession.
Achuthan calls it a “vicious cycle”:
TAKEN as a whole, he says, these and other indicators are quite clear. “We’ve entered a vicious cycle, and it’s too late: a recession can’t be averted,” he says.
Markets interestingly, are almost entirely obsessed with the Euro crisis and nothing else. If Achuthan is right then the risks in this environment are far greater than just the events occurring in Europe. You can read the full NYT piece here.