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11 minutes ago
Thursday, February 28, 2013
More bad news for recessionistas
- by New Deal democrat
Those people who've been claiming that a recession started "now" in September 2011, then probably in 1Q 2012, then by midyear 2012, and then in July 2012, got two more pieces of bad news this morning.
First, the first revision to 4Q 2012 GDP puts it - just barely - in positive territory. While the recessionistas touted that frequently recessions started in a quarter of positive GDP (which is true), in every single such recession the next quarter has always turned negative. No recession has started out with two quarters of positive GDP in a row.
Next, initial jobless claims came in at 344,000, confirming the new lower range of claims post-Sandy. No recession has ever started with initial claims making new lows.
It's probably uncharitable to add that only once in the last 100 years has the stock market made new highs 8 months into a recession.
With the sequester going into effect tomorrow, it's impossible to say if the blow to GDP, on top of the payroll tax increase, will do enough damage to actually push the economy into contraction. All we know is, left to its own devices, the economy as of the most recent monthly data is still growing.
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3 comments:
woo hoo, .1 growth and the Fed is pumping billions to keep the market because we know what happens when there is a hint of cutting off the helicopter money, its a selloff time, woo hoo, and Europe has been described as a "monetary Stalingrad," and as just noted above Spain's GDP is terrible, and we are decoupled from Europe thanks to our anti austerity approach, I can't contain myself over our student loan debts, our trillion USD deficits and Bernie saying that he is the best ever anti inflation hawk, whoo hoo we are all not in recession,
dude what a time to celebrate.
Recent data suggests that we probably escaped recession in January and February. Housing remains strong and consumption spending remains above water. According to CNBS, inventories are now at seven year lows. Thus, production is poised to increase in the upcoming months.
However, the economy continues to sail into headwinds. High gas prices and the increase in social security taxes appears to have slowed consumption spending. According to financial analysts, the once optimistic forecasts have now been revised downward. Analyst now predict that corporate profits are going to be negative in the first quarter. This coupled with sequester and the threat of government shutdown and default means that the probability of a recession occuring later this year remains uncomfortably high. Because of the low 4rth Q GDP numbers, there still is a chance that a recession has already begun. However, this probability is diminishing.
I shall insert a caveat. In 1932 we had a steep drop in the market. Five years later, we tried a little austerianism, and the event of 1937 followed. I am not a numerologist to insist that five years after 2009 will be the 2014 event, but we are trying our dose early, though not very severely yet. So perhaps the market will drop again.
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