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The next recession is … now?

By on September 29, 2012

Despite renewed efforts by the Federal Reserve to boost the economy and signs of a housing market rebound, Lakshman Achuthan makes the case that the US has already entered the next recession.

“In the current cycle retail sales have already peaked back in March 2012 and, according to the household survey, employment has declined for the last two months, and for four of the last six months. Mind you, the household data is revised a lot less than the payroll jobs data and also tends to lead it a bit at cycle turns… there have been revisions showing even weaker income growth going back a few months, followed by some apparent recovery recently. As with some of the other coincident data, this series will come under significant revision in the months (and years) ahead.”

“For the U.S., the economy is recessionary despite all of the extraordinary efforts by the Fed over the past four years. In that sense, one might argue that, as far as the economy is concerned, the Fed’s actions have become increasingly ineffective. The plunge in the velocity of money to record lows tells us that the Fed is pushing on a string – so no matter what they do there will only be limited traction. Basically, the recession has to run its course.”

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