Recession Ending? Whither The Economy?

[jyl]

It is apparent that the 2008-2009 recession is ending. Virtually every macro indicator, from durable goods orders to initial unemployment claims, housing starts to leading economic indicators, is showing patterns similar to those seen at the end of prior recessions over the past 50 years. The official "end date" won't be called by NBER for a year or so, but I believe the history books will record that this recession ended some time in 2H09.

The current debate has mostly shifted to the vigor, or not, of the coming economic expansion. Will it be a slow, weak, and fitful recovery, hobbled by weak employment, stagnant wages, high consumer savings rate, rising interest rates - which I think is the current "consensus" view? Or will the recovery surprise, on the upside or the downside?

The coming debate will be the potential for a double-dip recession, similar to the early 1980s. The bearish view is that the expansion will sputter out after the federal stimulus fades in 2011 or so, and the economy will fall into another recession.

Please keep your PARF-y comments out of this thread. We've managed to discuss economic and investment topics in a non-partisan, non-political way that has allowed these threads to stay out of the PARF cesspool - let's keep it up.

[m21sniper]

Gee and i just read an article that Foreclosures are accelerating as housing values continue to decline. Unemployment is also still on the ascent.

I think that the "crisis is ending" nonsense is just that.

Wishful thinking talking point nonsense.

The abortion of socailist health care will only worsen the problems we already face.

What's more, i don't think the "federal stimulus" has had any real effect whatsoever. It was a total political bill of goods.

[jyl]

Unemployment will continue to rise for some time after a recession ends. That is normal, we've seen it in prior cycles.

I'm not sure about the foreclosure patterns in prior cycles as compared to this one.

The federal stimulus has had barely any effect, because very little of the money has been disbursed yet. Most of that money will be disbursed in 2010 and 2011.

In general, one has to avoid confusing "the recession is ending" with "the economy is good". By definition, when a recession ends, the economy is at its worst. Then when the expansion begins, the economy remains bad for some time. The economy does not become "good" again until the expansion has been going on for some time (often years). If you wait for the economy to be "good" again, you miss much of the investment opportunity.

[The Gaijin]

Not to drag it into PARF - but I think the recovery is going to be gradual at best, and very much regional.

People are simple not going to stay in, invest in, or return to these rust belt places with high legacy costs and much higher taxes of all kinds. Some states might be zooming in a year or two and others will be treading water for a long time.

[Z-man]

Originally Posted by m21sniper

What's more, i don't think the "federal stimulus" has had any real effect whatsoever. It was a total political bill of goods.

From an economic point of view, I suspect it will be a year or more before we can quantify the effects of the federal stimulus 'system,' be it good effects or bad.

So it is too early to make a call on that aspect of the economy, IMHO.

-Z-man.

[m21sniper]

I think we are far from the end of the recession, and even farther from any kind of expansion.

But it doesn't really matter what i think i suppose.

[Scott R]

We laid of 60 people in my division today, more are planned.

[74-911]

Originally Posted by m21sniper

But it doesn't really matter what i think i suppose.

Sniper I think this statement rather applies to all of us. It doesn't really matter what any of us think.

Speaking to my next door neighbor this morning, she said her pay has been cut twice now but is very glad she at least has a job...

[Hugh R]

Watching with great interest. I've got about 10-12 years before retirement, and my portfolio which was very well divested in mutual funds of all kinds, is down a lot from the 10/2007 high.

I think the Feds and States are going to be raising lots of more taxes to pay for the stimulus, healthcare, etc., which will drag down the recoveries momentum. Especially when the public figures out that the depth they will reach to raise taxes doesn't stop at those making over $250K/year.

[jyl]

Originally Posted by 74-911

Sniper I think this statement rather applies to all of us. It doesn't really matter what any of us think.

Yes, it does matter what you think. If you have to decide what to do with your investments, it matters. If you have to decide what to do with your economically-sensitive business or career, it matters.

[tabs]

Where were you JYL when I called a bottom on the S&P of 870 recently and needed your support?

The recovery we are seeing in the DOW S&P and NASDQ has nothing to do with a stimulus or recovery of the economy. It is merely regaining ground lost during a panic. Economic fundlementals will kick in to moderate the Stock markets rise to current conditions. One has to see that the current economic downturn was caused by the stoppping of the economies beating heart...cash flow or loss of liquidity. This stoppage has caused the economy to go into a deeper decline then would be otherwise suspected.

The recovery in the economy has taken place naturally as very little of the Stimlus Bill money has hit the system. When the money hits one is going to see an unsustainable sugar rush inthe economy when the money wears off the economy will decline back to its fundlemental or underlying economic base.

The modifer on the economy going forward are political ones. With a HC and Trade and Cap it will force business to have one more parameter to figure out to keep its costs low and maintain profitability. This will put a drag on the economy and cause unemployment to remain higher then necessary. If the current proposals are enacted unemployment in the USA will remain solidily above 10%. The German model of unemployment rates are to be expected in the USA, as that is the economic model the current administration in DC wants to emulate.

So one might see an anemic economy going in the future after the stimulus sugar rush wears off. It will be characterized by high unemployment rates, high inflation rates, decling dollar in other words stag flation would be the order of the day. The end results Americans are going to be and feel poorer in the decades to come.

BTW higher taxes are implied with the HC and C&T bills.

[McLovin]

Tabs is correct.

[McLovin]

This is no longer a normal economy or a normal recovery, or even within the same ballpark as the past.

The original poster presents an analysis which completely ignores things such as the unprecedented deficit spending, etc. etc. etc.

Unfortunately, in these unprecedented and uncharted times, you can't have just a plain vanilla, normal economic analysis, devoid of the political decisions being made. You can't just pretend we are "business as usual" with our politics or economy.

[m21sniper]

McLovin is correct.

[McLovin]

Although I suppose if the discussion is focused solely on one number, i.e., just on whether the GDP number is negative or positive in a given quarter, you could do that.

But that seems a relatively useless exercise, given the big picture.

There probably will be a quarter in the next year where GDP moves to zero or slightly postive. As tabs posted, "When the money hits one is going to see an unsustainable sugar rush inthe economy." GDP is down, and that will move it up.

But big deal, because "when the money wears off the economy will decline back to its fundlemental or underlying economic base."

"The end results Americans are going to be and feel poorer in the decades to come."

"The current debate has mostly shifted to the vigor, or not, of the coming economic expansion. Will it be a slow, weak, and fitful recovery, hobbled by weak employment, stagnant wages, high consumer savings rate, rising interest rates - which I think is the current "consensus" view? Or will the recovery surprise, on the upside or the downside?"

I think there will be no real recovery, just some temporary "expansion" caused by more money being put into the system, which will, in the long run, cause more harm than good to the economy, U.S. strength, and US standard of living.

[Z-man]

Tabs - Very insightful. Thanks for the post.
-Z

[tabs]

The damaging part of this new round of Stimulus spending, which I think in part was a needed tonic for the economy if kept lean and mean, is the fact that the USA has shot its remaining reserve of economic goodwill and financial reserves. An apt analogy would be Hitler launching the Ardennes Offensive in the winter of 44, he shot his last strategic reserves on an ill fated gamble.

HC and C&T are more systemic drags on the economy. They will change the very dynamic of American Capitalism to a more European model of the private and public business partnerships. In othere words the public is now going to be a partner in American Business.

[fingpilot]

I think it's time to PARF this one.

[Jim Richards]

Originally Posted by Scott R

We laid of 60 people in my division today, more are planned.

Employment is a lagging economic indicator. Yr-to-yr housing permits & sales, Manufacturing ISM Index are some of the leading indicators to signal movement from recession to recovery.

[JeremyD]

Not seeing it yet in temp staffing / box mfg / underwear sales.

The free fall has subsided - but there damn sure ain't no recovery going on....

and I hate to say it - but I think tabs is on the money on this one. Unemployment will continue to increase - I think we'll see a 11% national rate.