This morning, the venerable Bloomberg financial news program wrote an article that all but proclaims a recession. A small excerpt of the evidence follows:
A number of weaker-than-expected economic indicators are raising suspicions that the U.S. economy may slide into recession sooner than many economists expect. The Chicago Fed’s National Activity Index – a broad-based monthly gauge of 85 indicators – fell to minus 0.87 in August, bringing the three-month moving average to minus 0.47, equaling the level of June 2011, which was the lowest since the depths of the Great Recession. This suggests the national economy is operating well below its historical trend rate of growth, with little sign of recovery.
The tone of the Bloomberg Orange Book has been equally disheartening. The Bloomberg Orange Book Diffusion Index was at 47.26 during the week-ended Sept. 21, well below the expansion-contraction level of 50. Essentially, every company has expressed some concern about the economy, while several have mentioned plans to curtail hiring and employment until the outlook becomes clearer.
Employment-related data from the Job Openings and Labor Turnover Survey (JOLTS) shows private sector hiring has fallen for two consecutive months and is the same as in mid-2011. New orders of non-defense capital goods excluding aircraft – an excellent proxy of future business investment in the quarter GDP report – have contracted by 2.9 percent over the last year, the slowest pace since November 2009 when the economy was emerging from recession.”
The article lists a wide range of additional statistics, and contains the typical impressive array of Bloomberg graphics.
The NBER’s Business Cycle Dating Committee (the group that is responsible for identifying the start and end of a recession) is notoriously slow in announcing an “official” recession. Their proclamations are often serious lagged. It is difficult to know when one is in a recession until one is already firmly there. No doubt, once NBER agrees that we are in a recession, the election will be over. Whatever changes the electorate might have wanted to make after “knowing” about the recession will be too late.
This economy is entirely stuck in neutral, or if one wants to believe the Bloomberg statistics, even worse. However incompetent one wishes to claim the predecessor was, given the historical length of recessions of less than two years, the current President and Congress cannot entirely blame our current economics on what the prior guy(s) did. Here, the prescription is actually fairly easy. Just stop the diatribe against the folks who actually create jobs and make investments. Instead, provide a stable tax and regulatory environment that provides encouragement to get off the sidelines. In short, we do not need more programs, but we do need the politicians (of both parties) to get out of the way. Here is an article that provides this same sentiment based on a Harris poll of job creators.