According to Ritholtz and Harrison:
Since 1953, when year-over-year Non-Farm payrolls go negative, there is a recession. This happened nine out of nine times for a perfect score! (I actually looked at the data from 1939 and it scores two other direct hits in 1944 and 1949 making it 11 for 11 in calling recessions.If you go to Ed's blog, you can get a more detailed analysis with charts to illustrate his points. For more detail on why I agree with Harrison and Ritholtz that we are already in a recession or fast heading into one, just check out yesterday's dire report , in the Washington Post, on last quarter's unemployment figures, soaring oil prices and a plunging stock market.
The data show that unemployment is not always a lagging indicator. Sometimes continuing claims jump before the recession actually begins.
Where are we today? +582,000 year-on-year, as of 24 May 2008. Continuing claims went over +200,000 up y-o-y on 22 Dec 2007. So are we in recession today? Sure looks like it.
According to the Post's report, the price of oil had a one day surge to $10.75 more per barrel and is now trading at $139 a barrel. This one day increase is more than the entire cost for a barrel of oil just a decade ago. In additional economic woe, the unemployment rate shot up to its highest level in two decades. Since every action has an equal and opposite reaction, while the unemployment rate and the price of oil are skyrocketing, the stock market is plunging in the other direction in reaction to all the bad news. Shaky investors are bailing. According to the Washington Post,
A soaring jobless rate, an unprecedented jump in oil prices and a sliding dollar sent tremors through financial markets yesterday and cast fresh doubt on how soon the U.S. economy would be able to break out of a pattern of feeble growth and financial instabilityIn an economy that was once booming for high rollers but never quite matched its promise for ordinary working people, this is truly grim news. When it comes to suffering the downturns, we all are truly in the same boat. Believe me, when belt tightening times come, it's the middle class that feels the squeeze first. But during the salad days of the economy's high point, they never shared in the gravy.
It was one of the worst days of economic news in a year already well-stocked with disappointment. The Dow Jones industrial average reacted by plunging 394.64 points, or 3.13 percent, its sharpest decline since Feb. 27, 2007. Other major indicators also dropped about 3 percent.
"Today's events are a combination of really nasty news for American consumers," said Andrew Tilton, a senior economist at Goldman Sachs.
Going into an election, John McCain is going to try to keep the focus on Iraq and national security, his two perceived strong points. But with these disastrous numbers and the very real possibility that we already are in a recession, which threatens to get worse, that might not be possible.
Trying to to control the agenda and dominate the debate is usually smart politics. This time, ignoring the public's pain and anxiety might not be so smart. And Republican solutions have pretty much been played out. I think the public is ready to listen to some different voices and different solutions because everybody knows you can't just taxcut your way out of this.