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.
5 comments:
We need to roll back the tax code to pre-Reagan, when the highest marginal rate was 50% (or was it 70%, I confuse it with Kennedy's tax cut.) Then we can invest all that money that the fabulously wealthy aren't spending on repairing our infrastructure. And then while we are at it, we can build a new energy infrastructure to support a greener economy. Laffer and Friedman would be rolling in their graves. =)
Yep, it's definitely a recession right now. The thing to keep in mind is that the people who make the official announcement about whether or not we're in one always have a lead time of several months before making their declaration. I agree with tx2vadem. There has to be a reordering of the tax structure more in keeping with what it was pre-Reagan. And in addition to that something has to be done about the rampant speculation on oil futures, which used to be regulated but now no longer is.
Depression.
I was pumping $4 per gallon gas into my mid size sedan yesterday. The total came to $62. I decided not to go to the movies or go out for Sunday supper. As I was looking across the WaWa parking lot, I saw a man digging through the auto vacuum catch baskets for coins.
I walked over and asked the fellow if he was out of work and he said that it had been over a year since he was able to land a steady job.
Thank-you George W. Bush. I hope your revenge against Saddam Hussein was worth it, you jerk.
Not a recession, but a DEPRESSION.
J. Tyler, with new economic data due out later this week on real estate, inflation, and other indicators, we may find the economy is indeed spiralling down into a depression, or worse, stagflation. At any rate, I feel your bitterness. Hang in there, it will get better.
Tx2vadem and Catzmaw, basically what you both are recommending is pretty much what Paul Krugman suggests we need to do in his new book, Conscience of a Liberal.
If nothing else, the Bush tax cuts have contributed to the severe income inequity that we've experienced in good times as well as bad. That has taken a toll on this economy just as lack of sensible regulatory oversight of the mortgage industry and the stock market has.
We need to challenge the unthinking anti-regulatory, free market, trickle down theories, which were disproved once during the Reagan-Bush I years and are again failing this country.
We need a robust free market, but one with sensible regulation that protects investors, consumers and workers.
Depression is characterized by duration--it has to last years-- not by how depressing it is to look at, depressing though it may be. And I happen to think there are solutions available that will start to turn this around within by the end of 2009.
I was going to say "in the next 12 months" but Bush's plan is, apparently, another stimulus check. Holy Christ. How did Benjamin Franklin define insanity again?
Energy prices are the key right now, and we've reached a point where something dramatically is going to shift because consumers suddenly started acting rationally at $4/gal. At $3/gal, their solution was to grin and bear it without altering their consumption habits. But the status quo wasn't going to survive $4/gal. What a difference a dollar makes.
People have finally started driving less. Many SUVs will cost $100,000 to operate over the next five years in fuel costs, so their sales are plummeting. Vespas, however, are going like hotcakes because they get a ridiculous 60mpg in the city. As a consequence, manufacturers are starting to do voluntarily what years of activism couldn't accomplish in Congress: they're improving their mileage standards and shedding SUV lines. Meanwhile, public transit ridership is at a 50 year high in many regions.
We're moving towards a new status quo now, and I think it's pretty friggin' exciting because we have a once-in-a-lifetime opportunity to shape what that new status quo will look like. I suspect it will look like:
1. A greater diversity in alternative energy, driven both by private investment and government funding for R&D.
2. More energy-efficient vehicles, with tax breaks for purchasing vehicles that excede certain MPG standards.
3. In the nearterm: businesses that focus on delivering entertainment to your doorstep or to your desktop will outperform businesses that require you to get in your car and drive ten miles. The AMC movie theater that shares a giant parking lot with an Applebees on the other side of town will have a harder time filling that lot, but Netflix will do much better.
4. In the long term--better mixed use development (though don't expect to see as much of this as you'd like. New developments will be smarter, but we're not going to tear down out entire society and start over, at least not before we've created a new sustainable status quo with smarter cars).
5. Regional and national rail is actually going to start looking competitive. As airlines continue to increase their fees to offset their jet fuel expenditures, spending less money and more time on a train will begin to look more and more viable for shorter-distance trips.
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