Calling recessions when the evidence is there

20 Nov 2012 by Jim Fickett.

I've been reluctant to agree with ECRI and others who see a US recession in progress, and I think some of my friends have seen this as stubborn hesitation or blind optimism. So I would like to point out that I called the current euro zone recession quite precisely and with no hesitation.

First the official opinion, from the Euro Area Business Cycle Dating Committee: “Euro area GDP peaked in the third quarter of 2011 … the euro area has been in recession since 2011Q3.”

And now my calls:

31 Oct 2011, 31-european_unemployment_may_be_in_rising_trend: “It is starting to look quite likely that Europe is falling into recession.”

7 Nov 2011, Another sign of likely recession in Europe: ”…retail sales data through September. The trend is clearly down.”

1 Dec 2011, Europe unemployment now in clear rising trend: “Up until now it was unclear whether the rise in unemployment was just a blip or something more substantial. Now it is pretty clear the trend is a rising one. More evidence that Europe is already in recession.”

14 Aug 2012, Europe is clearly in recession, but so far the drop in output is small: “Output fell in Q4 last year, was level in Q1, and fell again in Q2. Although there have not been two successive quarters of falling output yet, this is nevertheless pretty clearly a recession.” (That “level in Q1” was revised to a drop in the next revision of the data.)

15 Nov 2012, Euro zone GDP has been declining for a year now (Pointing out that it was one continuous fall in output – a fact which had been missed by some news articles due to the above-mentioned revision.)

But for the US, I just don't see it yet. Very fragile recovery, perhaps on the edge, but not yet a recession.