The Scariest Economic Forecast You'll Read Today
An economic researcher that usually gets these things right has said a double-dip recession is inevitable, and there's nothing policy makers can do about it. It's a glum report from the Economic Cycle Research Group, which Andrew Sullivan and others have pointed out predicted the last three recessions correctly. The group's report reminds us it didn't give any false alarms in between either. The Wall Street Journal points out is a change of tune from ECRI's earlier, conservative reports: "Up until recently, the ECRI, which was among the first to note the recovery that began in mid-2009, has stopped short of saying its leading indicators point to a recession. No longer." For its part, ECRI says the economic cycle has to run its course:
A new recession isn’t simply a statistical event. It’s a vicious cycle that, once started, must run its course. Under certain circumstances, a drop in sales, for instance, lowers production, which results in declining employment and income, which in turn weakens sales further, all the while spreading like wildfire from industry to industry, region to region, and indicator to indicator. That’s what a recession is all about.
But how can we have a new recession just a couple of years after the last one officially ended? Isn’t this too short for an economic expansion?
More than three years ago, before the Lehman debacle, we were already warning of a longstanding pattern of slowing growth: at least since the 1970s, the pace of U.S. growth – especially in GDP and jobs – has been stair-stepping down in successive economic expansions. We expected this pattern to persist in the new economic expansion after the recession ended, and it certainly did. We also pointed out – months before the recession ended – that because the “Great Moderation” of business cycles (from about 1985 to 2007) was now history, the resulting combination of higher cyclical volatility and lower trend growth would virtually dictate an era of more frequent recessions.
It's a bummer of a report after economists surveyed Bloomberg's put such faith in the American Jobs Act for restoring the economy. Hopefully this will be the one that breaks ECRI's correct-prediction streak.
