Economic Forecaster Says U.S. Is Headed Into A Recession

The Economic Cycle Research Institute is out with a very gloomy forecast for the U.S. economy:

The U.S. economy is staring down another recession, according to a forecast from the Economic Cycle Research Institute.

“It’s either just begun, or it’s right in front of us,” said Lakshman Achuthan, the managing director of ECRI. “But at this point that’s a detail. The critical news is there’s no turning back. We are going to have a new recession.”

The ECRI produces widely-followed leading indicators which predict when the economy is moving between recession and expansion. Achuthan said all those indicators are now pointing to a new economic downturn in the immediate future.

His recession call puts him ahead of most other forecasters. A CNNMoney survey of economists this week pointed to a one-in-three chance of a new recession in the next six months. The most bearish predictions put the odds at 50-50.

Achuthan said it is still possible that the recession will be mild this time, lasting less than a year with relatively limited job losses. But he said if there are shocks to the system, such as another financial meltdown due to the European sovereign debt crisis, it could become a very serious and deep recession.

His call comes the day after the government’s final report on second quarter gross domestic product, the broadest measure of the nation’s economic health, showed weak growth of only 1.3% in the three months ending in June. Achuthan said he’s confident that the recession either began in the third quarter, which ends today, or will begin in the fourth quarter.

If Achtuthan turns out to be right, the implications of a downturn should be rather obvious. All those deficit and revenue projections in everybody’s budget forecasts can be thrown out the window, the worst work of the Joint Select Committee on the Deficit (the “Super-Committee”) will become even more difficult, and the political landscape will become even more of a minefield for President Obama and the Democrats. More importantly, though, the psychological impact of a contracting economy so soon after one of the most painful recessions since the end of World War II should not be underestimated. Voters will be pessimistic and scared when they walk into voting booths in 2012, and there’s no telling what could happen then.

Actuthan puts it best, I think:

“The reason some people feel like the previous recession never ended is no mystery; the jobs that were lost have not been recovered,” he said. “But we’ve added more than 1 million jobs in the last year, which only happens if we’re in a recovery. If you think this is a bad economy, you haven’t seen anything yet.”

I’m pretty sure I join everyone in hoping that he’s wrong, but I get the feeling that he isn’t.

FILED UNDER: Campaign 2012, Economics and Business, Quick Takes, US Politics
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook

Comments

  1. Dave Schuler says:

    All those deficit and revenue projections in everybody’s budget forecasts can be thrown out the window, the worst of the Joint Select Committee on the Deficit

    Freudian slip?

  2. Loviatar says:

    Whats been done over the past 3 years has been treasonous and unpatriotic, but it looks like Doug and his fellow Republicans got what they wanted, the economy is headed into the crapper right before the 2012 election.

  3. Ben Wolf says:

    At this point I’m grateful the current deficit is high enough to prevent a depression. That seems the best we’re going to get.

  4. Racehorse says:

    How to prevent a recession: free up the economy by lowering taxes, do away with a lot of taxes and “fees” (taxes), get rid of the hideous gas taxes that hurt the working people, eliminate a lot of the stifling regulations and controls on small businesses, do away with a lot of the unfair trade agreements, get rid of Obama Care, get rid of laws (Dodd-Frank, Durbin’s bill that has increased checking fees) that hurt consumers. Let’s get our free enterprise system working again.

  5. john personna says:

    @Racehorse:

    So the gas tax is to hurt poor people, and not to build roads? What happened to “user fees?” No good when you are user?

    I did read an economist who asked “at these interest rates, why collect taxes at all?” but he’s channeling Krugman more than Norquist. Geez Louise, you have to see that the “cut taxes and repeat” thing has been going on for a decade, and there is only so far you can go without giving up on revenue entirely.

  6. David M says:

    @Racehorse: Please explain what you would replace the gas tax with and how that would benefit working people.

  7. Ben Wolf says:

    @Racehorse: You have absolutely no evidence that further deregulation and tax cutting will hwve any beneficial effect on the economy, you’re just spouting off talking points. The evidence is actually to the contrary: economic performance during the last thirty years of neo-classical economics has been significantly worse than during the decades of Keynesianism.

    Surely you can do better than mindlessly repeat what we all know to be hogwash.

  8. Racehorse says:

    @David M: A lot of times this gas tax goes into a “trust” fund that is regularly raided by the state when it is “broke” such as happens in my state. Here is another solution, a “trade off” : keep the gas tax, but allow a deduction for miles driven in a year, such as 50 cents per mile. This would give the working people some relief for miles they have to drive to get to work and other places, and a lot of people use their vehicles in their line of work.

  9. john personna says:

    @Racehorse:

    False, state and federal tax do not cover their respective rroads General funds already make up the difference.

    Do Roads Pay For Themselves? Setting the Record Straight on Transportation Funding

  10. David M says:

    @Racehorse: I’m not sure why people that use the roads the most should be exempt from paying for them. Also, if I read your argument correctly, states are low on revenue, so reducing the gas tax will help how? That’s approaching underpants gnomes logic territory there.

    The gas tax is most likely much too low right now and should have been increased long ago. Not only to meet the current funding needs, but increase our investment in mass transit / public transportation. The gas tax is probably one of the most justified taxes we have, yet people still advocate reducing it with no plan to make up the revenue.

  11. anjin-san says:

    Let’s get our free enterprise system working again

    Cheney was far and away the most powerful VP in history. He was also one of the country’s leading businessmen with Halliburton. The Bush administration was the Chamber of Commerce’s wet dream.

    Remind me again how that worked out.

  12. Fiona says:

    I think we need new terms to refer to the current state of prolonged economic contraction. Recession doesn’t quite cover it. Job growth after the Bush recession was weak. The economy only “grew” to the extent the housing bubble enabled people to borrow from their inflated equity to consume. Once the bubble popped, and with no new bubble to replace it, demand tanked. A consumer economy without consumers is a stagnant, contracting economy.

  13. Mike & Ike says:

    Recession?
    Your kidding, we have another 600 million to spend just ask MCC

    According to MCC CEO Daniel Yohannes, the changes reinforce “MCC’s core values of focusing on growth, demanding results, promoting transparency, highlighting policy performance and being disciplined and selective in our partnership decisions.”

    The updated selection criteria will be used along with the existing version when MCC’s board assesses countries’ performance in its next meeting in December.

    The MCC board also selected Tunisia as eligible for Threshold Program funding. Being in the heart of the Arab Spring, Tunisia’s ability to sustain its transition to democracy, Yohaness says, is closely linked to its economic performance. The MCC-Tunisia partnership will thus center on “a policy reform-based program to identify and address binding constraints to economic growth.”

    In addition, MCC conditionally approved a $600 million compact with Indonesia pending finalization of technical negotiations with its government

    The compact aims to reduce poverty in the world’s fourth most populous country where more than 140 million are poor. It will include projects related to supporting low-carbon economic development, a nutrition program to prevent stunting among children and a project to modernize the government’s procurement system.

    These projects were developed by the Indonesian government in consultation with local governments, civil society and the private sector.

  14. Bob says:

    @Loviatar:

    I agree, Obama’s policies are diametrically opposed to sound fiscal, job creating, growth producing policies. Obama has also demonstrated beyound doubt that government spending does not a recovery produce. Common sense agrees; you can’t spend your way out of debt and into prosperity.

    Thus Obama is one and out!