Reader B sent this a couple of days ago, and I had to be sedated after reading it, so I’m only getting around to posting it now:
Early last week, ECRI notified clients that the U.S. economy is indeed tipping into a new recession. And there’s nothing that policy makers can do to head it off. […] Why should ECRI’s recession call be heeded? Perhaps because, as The Economist has noted, we’ve correctly called three recessions without any false alarms in-between. In contrast, most of those who’ve accurately predicted a recession or two have also been guilty of crying wolf – in 2010, 2005, 2003, 1998, 1995, or 1987. […] It’s important to understand that recession doesn’t mean a bad economy – we’ve had that for years now. It means an economy that keeps worsening, because it’s locked into a vicious cycle. It means that the jobless rate, already above 9%, will go much higher, and the federal budget deficit, already above a trillion dollars, will soar.
Here’s the guy who called it being interviewed on Bloomberg. We’re almost 7 million jobs under our 2008 employment peak now.
arguingwithsignposts
Mistermix, you should have thrown in a link to ED Kain. It’s awake.
Comrade Mary
Meanwhile, the morning show on the CBC has a vapid twit marketing her magazine on the most expensive homes in Toronto, which exists “to showcase beauty, not stand in judgement — it’s not my job — yes, there’s a gap between rich and poor, but hasn’t there always been?”.
4tehlulz
JUST AS PLANNED
/GOP
deep cap
Honestly, it seems as though the country’s been in a resession since the dot-com bubble burst. There wasn’t a time between 1999 and now when I didn’t hear about how hard it was to find a job, etc etc.
I suppose the only people that were “successful” in the intervening years were Subprime lenders and Haliburton.
lacp
Just great. I was gonna have coffee; looks like it will be scotch instead.
Maude
@lacp:
Pour a double for me.
Lee
When I ask my Republican friends if there is any doubt that if the Republicans win in 2012 that one the first things they would do would be to pass a massive spending bill to stimulate the economy, they always answer “No”.
Xenos
@Lee: What else is there for them to do? Other than find a war to start, and pretend it is not stimulative?
Actually, they may very well do just that.
WereBear
Well, yes, there is something… but the Republicans are blocking it.
If THEY aren’t suffering in this economy… what’s the problem?
Lee
@Xenos:
A couple of them answered that the Republicans would “bomb XXXX because it was about time someone stood up to them” and after I pointed out the stimulative affects of war they got really quite.
kdaug
The facts that 1) ECRI/Achuthan have correctly predicted every recession since they’ve been around, and 2) they haven’t predicted any that didn’t materialize, tends not to give much hope.
arguingwithsignposts
@Lee: The troubling fact is that our two “awesome adventures” are keeping a lot of young people out of unemployment lines right now, and when we draw them back, which we should, there’s still not going to be anywhere for them to go.
@WereBear: I think somehow congressional pay should be tied to the economic health of the country. Maybe if those fuckers were actually working with an incentive to make the economy better, they’d produce better outcomes.
harlana
@Comrade Mary: aw, that’s cute. just what we need, more of that. oops, that’s Canada. i guess vapidity can be universal.
PeakVT
We’re almost 7 million jobs under our 2008 employment peak now.
We’re about 12 million jobs short of where we need to be, adjusting for population growth.
cathyx
So according to ECRI, since the last recession things continued to stay bad, kind of a flat line, so to speak. Now it might worsen, so that is a new recession? Is that how they call it? It seems to me that it is still the same one just continuing to worsen.
arguingwithsignposts
@cathyx: Unfortunately for us, economists have a technical meaning behind the term “recession.” Wiki:
Technically, we haven’t been in a recession for a while. But that doesn’t mean much in reality, which is where people other than politicians, pundits and economists live.
harlana
i just . . . really? people are surprised about this? just . . . wow . . . i got nothing. confirmation that i actually *was* awake during the last 5 or so years.
Feudalism Now!
Double dip recession? Hoocoodanode? The problem is that if the rethugs take ove the WH and senate, it will be too late to pass a stimulus that will do enough to turn the economy around. There are global problems that will sink the economy further. Time to brush up my mandarin, although China is going to feel some pain from this too.
cathyx
@arguingwithsignposts: So by definition if the decline doesn’t run along a continuous downward sloping line then we are not in a recession during the times the line is flat?
Ash Can
@Xenos: You can bet that if Republicans regained the White House, bombs would be raining down on Iran the following day, and sabers would be rattling in China’s direction. If it’s someone like Rick Perry in the White House, we might very well start a war with China as well. And we’d lose.
Not a pretty prospect.
harlana
unfortunately, infrastructure projects, while badly needed, are only a bandaid
PeakVT
At about 4:20 in the clip the guy says, “Anyone looking for a job has a right to call this a depression.”
arguingwithsignposts
@cathyx: basically, yes:
kdaug
@cathyx: We had a few quarters of GDP growth which marked the “technical” end of the last recession. Don’t mean much in the real world, though.
jwest
When conservatives take over next year, the biggest change will be scraping the existing tax code and instituting either the Fair Tax or something similar.
By completely eliminating corporate tax and moving to taxing consumption rather than income, the U.S. will become the tax haven of the world and only place it would make sense to locate a business. By allowing businesses to thrive, the competition for workers will make wages rise.
Embrace capitalism. Socialism is for losers.
barath
Just thought I’d add that after sending this to Mistermix I figured I’d write about the larger context (i.e. why are we going into recession again, etc.), and it’s because we’re likely at the the end of economic growth.
Davis X. Machina
@arguingwithsignposts:
Total uniformed personnel, Reserve, Guard and Active: just less than 3.5 million. The jobs shortfall is almost 4x that. The only solution I can see that is known to work involves persuading Ms. Merkel to invade Poland.
WereBear
I’d like to add that I got in touch with my Inner Moustache of Understanding and have been selling cat items; enough to keep me & the Better Half in downloaded media, anyway.
However, once the Debt Ceiling Crisis started, business sank like a rock with a hole in the middle. If my teeny tiny company felt it; so did everyone else.
T. Geithner
As long as Wall Street does okay, economic growth will follow. Don’t sweat this.
jwest
Joseph Goebbels was a big fan of “moderating” comments by others too.
Belafon (formerly anonevent)
@jwest: But John Cole isn’t preventing you from going somewhere else.
ETA: I bet you could even start up a website about how mean John Cole is to you.
lacp
I really hadn’t planned to spend my golden years as a subsistance farmer. Oh, well….
jwest
@Belafon (formerly anonevent):
Instead of running away from it, search out the hole in the echo chamber.
Read, learn and either strengthen your argument or adopt the alternative.
Linda Featheringill
@lacp:
I grew up that way. It’s a bitch. However, it can be done.
The problem is, however, that I had a lot more energy and strength as a young person. Sigh.
Linda Featheringill
I read the ECRI article. Dayum. Abandon all hope.
giltay
@Comrade Mary: That was an excellent interview. Matt Galloway steered her right to the core of the conservative argument and got her to say it in plain terms: the elite exist to grant jobs and we should be grateful. And he got her to do it by basically asking her to justify her own existence as someone who fawns over the rich. All just by asking friendly questions relevant to the issues of the day.
(Apologies for the gush.)
Montysano
@Xenos:
There’s nothing left to do, really, other than to hope for a recession instead of some sort of global meltdown. This problem has been baking for 30 years.
My prediction is that the major banks (which were down 10% yesterday) will be shortly found to be fundamentally insolvent (which they have been for some time), which will trigger another liquidity crisis, which will in turn set off a wave of defaults on credit default swaps. Then we’ll know why W. Buffet calls CDS “financial weapons of mass destruction”.
I’d be thrilled to be wrong.
chopper
@Montysano:
BAC is looking to be the first on the block. man, that company is a hot mess.
kdaug
@Montysano: My bet, too. Looks like we’re going to find out what happens when “too big to fail”, fails.
WereBear
@kdaug: Disassemble them, sell the pieces, and have a government stopgap for financing in the meantime.
Heck, I’ve been boiled down for my net worth TWICE now. Their turn!
OzoneR
@deep cap:
This is true. I’ve been out of grad school since 2003 and the job market was always hard after that.
Oddly enough, i found it easier to find a job in 2009 than I did in 2004, but not a good paying one.
arguingwithsignposts
@Linda Featheringill: If the ECRI article makes you depressed, don’t ever read The Automatic Earth. Man, those people make Nouriel Roubini look like captain sunshine.
barath
@arguingwithsignposts:
The thing about The Automatic Earth – and I’ve been a reader for a couple of years – is that they tend to be perma-bearish. Which is okay I guess – there are many fundamental reasons to be pessimistic about the financial system. But it also, unlike ECRI, tends to make them less than reliable in predictions. (They’ve predicted three major stock downturns in the last three years, and it looks like only now is it actually happening.) I still like reading their analysis, but look to ECRI and the like for calls of major turning points.
Montysano
@kdaug:
A chart that I just discovered is the daily rates that banks pay for credit default swaps. In addition to their stock prices crashing 10% yesterday, the big banks’ swap rates went through the roof, which is the market saying “We don’t really want to insure any more of your paper”.
Phil Gramm, with his brilliant idea to deregulate CDS, may be our new “history’s greatest monster”.
Belafon (formerly anonevent)
@jwest: Well, then, you don’t get to use the Goebbels reference then, do you?
askew
Bonddad has a great rebuttal up on this prediction. He has some good points. I think we’ll avoid a new recession and just keep chugging along in a very weak economy until the government pushes out a new stimulus.
PeakVT
@barath: Their views are basically unfalsifiable as far as I can tell. I still look at the blog from time to time but it hasn’t told me anything new for a while.
barath
@PeakVT:
Agreed.
piratedan
@jwest: well I suppose you would know since you appear to be very concerned with perpetuating the “big lie” for your positions.
Shinobi
Ugh. I guess I had better learn how to garden.
This is so depressing.
trollhattan
Good news, our Überclass will remain relatively safe from any double-dip.
http://www.washingtonpost.com/business/economy/cozy-relationships-and-peer-benchmarking-send-ceos-pay-soaring/2011/09/22/gIQAgq8NJL_story.html?hpid=z2
El Cid
@Montysano: The way he pushed it through was to slam this giant (2,000 page if I recall correctly) amendment into the 2000 budget not yet submitted by Bill Clinton, as he was waiting for the results of Bush v. Gore, which elected Bush Jr. Preznit by a 5-4 popular vote. At that point, it just couldn’t much be delayed. Clinton had been in favor of this general deregulation, of course, but likely not quite so ridiculously recklessly. (Which is, of course, a standard New Democrat approach.)
El Cid
Bondad says:
That’s probably broadly accurate; yet in my company and others I know, hourly workers’ hours have recently been sharply reduced, employees aren’t being scheduled for formerly solidly predictable workdays, and revenues have dropped sharply in some areas even when other areas have been stable.
I don’t know whether or not this is “fat” being cut or a hungry body beginning to consume its own protein.
trollhattan
@Montysano:
For the life of me I don’t know why his gift to grifters isn’t a point of daily discussion. We can’t blame it on post-9/11 stupification, since it happened the previous year, it was just everybody taking their eyes off a very important ball.
Also, too, Gramm was McCain’s campaign economic advisor and would surely have earned a cabinet role in a Grumpy-Goofy administration. Ponder that for a moment.
Elie
Its been said by others before — and also much better, that we are in the middle of a major economic adjustment that fuses together a “regular” recession – where one sees layoffs and other measures by business to contain costs — mixed with a real period of adjustment to a change in the types and numbers of jobs necessary to propel the US and World economy. To me it will be hard to predict much given the complexity of this and the sheer not knowing about what types and numbers of jobs will be needed and by which types of organizations.
The United States has really screwed itself by letting its educational system (elementary through advanced post grad), both degrade to “test taking” and/or price itself out of existence as college tuition costs go through the statosphere. We are competing with much better and completely educated countries and/or countries that are hungrier and that feel less “entitled”.
We are NOT going to solve this with a stimulus, though I advocate for one to help ease the continued painful adjustment. Manufacturing jobs are going to be the greatest affected in the short term. China is competing strongly with the US on green energy jobs and has been undercutting our pricing.
This is not a partisan issue, to my mind, but one of great importance to our overall security. What a time to be having the Republicans throwing their weight around, playing small ball cause they are too stupid to figure anything out besides how to be stupid assholes.
I hope that Americans wake up, but as usual, they may not in time and reward the assholes by putting them back in power…. with the help of our emo progs who keep stoking the “I’m so disappointed” bull.
El Cid
@trollhattan: In addition, when this was playing out in real time, the CFMA was obvious as the horror it was. But the political establishment was rigidly committed to ignoring any lessons from the collapse of the Savings & Loan branch of the banking sector — after all, this was an exception, an old-timey institution being superseded by all our awsum new financial innovation, which we were seeing the sun rising upon due to the final escape from Glass-Steagall.
It was the result of ENRON’s “lobbying” (hey, whaddyaknow, Mrs. Gramm was the one serving ENRON on the old CFTC), and efforts of people like Dodd and Feinstein to re-impose regulation on OTC derivatives after the bill was signed at the end of 2000 were decried as attempts to stifle the banks, and since the banks were all ‘nervous’ at the threat of this terrible potential limitation to their ability to freely use their business acumen (or firms like ENRON, pre-collapse), we best not do it.
El Cid
@Elie:
If we had so much better educated our younger generations, what would they be doing? Who would employ them? Do they create their own jobs by dint of their training?
If there are monumental changes to employment (due mainly to the world overclasses changing their economic needs, not the bland ‘automation’ or ‘trade’ explanations), then that stems from those economic changes, not the lack of worker training.
It’s not that worker capabilities have no roles; but the presence of a great degree of skill and experience doesn’t get someone a job when the desire or capability of hiring and paying for these positions so drastically weakens — as is the case right now [or during the last decades’ declines].
This notion of ‘competing’ with other nations is less than helpful when the overall desire and pressure to hire actual people or to pay them well drops so precipitously.
But, sure, it’s the fault of the emo-progs, who determine things such as US investment in Chinese production, or such.
wrb
@harlana:
No they aren’t if there are enough of them.
The output gap is $1.2 – $2 T / year. Spend that (adjusted for the efficiency of the type of spending, infrastructure is pretty good) and there is no recession. It is a recession of choice.
wrb
@Elie:
Could, just as the WWII stimulus investment in education, technology and infrastructure returned decades of prosperity and power.
A smart stimulus would include investment in education, green technology etc.
El Cid
@wrb: There was also a lot more than that. It helped that Europe (and in particular via the Marshall Plan of economic aid indirectly to the US) and Japan suddenly became mass consumers of US-produced goods, and that Western Europe and Japan were still (by US support) able to rebuild using the raw materials stolen by them from their colonies. US support of continued French colonial hegemony in Vietnam was in large part due to the US’ desire that France continue to receive Vietnamese raw materials & agricultural production. So there were quite a huge number of factors, but without the WWII-based New Deal II (which is really what the “WWII” part of our rebuilding more or less was), those advantages would have been lost for all but the uberclasses.
Elie
@El Cid:
I did not say that it was the fault of the emog progs, YOU did.
I hear your point on the education/demand problem. I don’t completely disagree but don’t see how having a less effectively educated population compared to other countries helps us. You think its that irrelevant? Who adapts better to change — the educated or non educated? Also, what helps the political process more — having a bunch of under or ineffectively educated people?
I don’t think that the answer to the types of work and economic perforamce drivers is truly unknown — just unexplored in an organized, deliberate way. Our government should be doing that, don’t you think? Rather than just throwing up their hands and giving up like you seem to be doing…
Elie
@wrb:
You just selectively clipped what I said. I said that I favored a stimulus but did not think that it would provide the complete answer. We definitely need more than one intervention to ease the way forward for folks and a stimulus is part of that.
wrb
@El Cid:
Yes, I agree that there was more, and you did a good job of describing what it was.
I’m also convinced that in current circumstances, especially with real interest rates zero or negative, a similarly aggressive re-investment in the country would pay-off spectacularly, if it was directed toward enabling and enriching all Americans, not just the few.
During the Reagan years the M&A boom resulted in the looting of the human, research and productive capital of America’s corporations. The same priorities were also applied to the country as a whole and for the next 30 years it was stripped.
wrb
@Elie:
Elie,
My argument is with this. I think we’re being hurt by people over-complicating the issue.
Stimulus could provide a complete answer if of sufficient size and directed intelligently, for the good of all the citizens.
For unemployment and the the output gap direct hiring, and massive lower and middle class tax cuts could also be a complete answer, although the latter would be less efficient.
I fear the passivity that results from the belief that the solution is terribly complicated.
Elie
@wrb:
I was not arguing for passivity or inaction. Just saying that a solution is simple, however, won’t necessarily make it so. All problems, complex or simple — have to be chunked out into ways that will help them be addressed. Even as we both agree on stimulus — which one to start with, how much etc — ya know — the DETAILS — matter.
I see no problem with enacting selected stimulus while AT THE SAME TIME, looking at and determining the jobs and preparation fo those jobs that needs to happen.
Why is it either or and why is thinking and planning for the right jobs “too complicated”?
Maybe its just too complicated for you?
But then, we didn’t elect you to try to figure it out either. Good thing.
Carry on. Its always simple in your world.
wrb
@Elie:
Hey chill with the negitive waves.
I was not, btw suggesting that getting a solution enacted is simple for Obama.
Just that there are simple solutions available, which are, however, blocked by one side or the other.
ThatLeftTurnInABQ
@wrb:
This last part is key and I don’t think we have all the pieces of the puzzle in place for a massive domestic infrastructure program to stimulate the economy today. The New Deal and WW2 spending occurred in an environment with high tariff barriers and high top marginal tax rates which we don’t have today.
Why does this matter? Because when talking about stimulus spending in the abstract it is too easy for us to forget what this means in practice: govt contracts awarded to private sector companies. The govt doesn’t pay money to workers directly, it pays the corporations which win the contracts to perform the scheduled construction.
So where does the money spent on those contracts go, and how much of it makes it to workers here in the US? In the absence of tariff barriers and a better tax structure with regard to the repatriation of offshore earnings by multinational corps, some of that money is going to leak offshore (i.e. some of our stimulus money will end up stimulating the Chinese, German, etc. economies rather than our own) and given the current top marginal income and capital gains tax regime and the wage structure of large US corporations, much of that contract money which stays onshore will go to compensation of C-level corporate officers and major equity shareholders rather than as wages to workers. Which means that the multiplier effect of govt money paid out on those contracts won’t be much better than what we would get with yet more Galtian genius tax cuts, because a lot of it is going to end up in Galtian hands anyway, until such time as we perform a strongly progressive reform of our tax code and trade agreement regime.
That’s one reason why I’m a little skeptical of arguments that everything would be wunderbar if only Obama had gotten a bigger stimulus out of Congress in 2009/2010. I think a lot of the money spent would have gone to the CEO of Bechtel and other folks like that, for all the good that would do us.
wrb
@ThatLeftTurnInABQ:
I agree with most of that, with some qualifications.
-The calculations Romer, Krugman, Moodys and others did allowed for the leakage. It would be better imo, to have higher barriers against leakage- both upward and outward- and essential if we were to undertake the massive WWII-style stimulus/re-investment I suggest over and above a recession-curing stimulus.
-Not all stimulus need be in the form of contracts to large corporations. Hiring teachers and professors, funding research, funding small-scale local contracts are all examples.
Elie
@wrb:
Gotcha.
Sorry.
Sometimes difficult to get just the right balance in communicating one’s thoughts to people one does not know well and where the emphasis may not be exactly on the right part. Sarcasm can also come off wrong
Thanks for your patience
ThatLeftTurnInABQ
@wrb:
Agreed. I think a lot of folks get hung up on the idea that stimulus has to look like what it did in FDR’s era, when our economy today is very different. Today we have to work harder to make sure the money is spent at a level where it goes into the hands of working and middle class folks. Having said that, spending govt money requires a prudent degree of oversight to make sure that the money is being properly billed and well spent and the sort of fine grained contracting that you are describing is hard to scale up without dragging along a lot of bureaucratic overhead in the form of audits, controls, etc. Govt contracting is full of red tape in part to try to minimize the degree to which the money spent is wasted or stolen. We can do this, but it takes time to put a regime like this in place and make it effective.
Jay S
Not to rain on the doom and gloom parade, ’cause I think there’s plenty of doom to be gloomy about, but the ECRI may be exaggerating their previous accuracy.
Via Nate Silver.
El Cid
@Elie: When pointing out that there are larger problems that — at some point in time, perhaps ever beyond the very next election, at whatever time we find ourselves — exist whether or not we wish to grapple with them yet or not.
As I suggested, it would indeed be better to have a better prepared citizenry (I tire of this cog-like term ‘workforce’) with training and education and such. In many ways.
But if there aren’t jobs, there aren’t jobs. Contrary to a lot of Friedmanesque myths, it’s pretty rare for people to create their own jobs. “Half of all jobs” may be created by small business, but overall they are less stable and lower paying and easily destroyed compared to working for large business.
The employment situation is reflective of more than the individual preparedness of a workforce, to use that term; it’s reflective of — more clearly, is — the local, regional, national, and international economies.
That’s why I mentioned the contradiction that in this type of economic environment, the very best trained & equipped workers are also losing jobs, pay, and power.
We’re avoiding these fundamental questions, which is what of course our national political discourse is really, really good at, and we repeat partially correct phrases about “competitiveness”.
Here’s an irony: our Southern workers may now become a labor force (cog-like impression intentional) of choice for other nations, even China. This builds upon the policy successes of anti-labor policies of the Southern plantationist governments and the anti-labor mythmaking of the anti-labor worshiping billion dollar press on top of the anti-labor policies of Japanese, German, and Korean car companies.
These workers are more “competitive,” not because they are more highly trained or efficient, not even just because they’re here so logistically production is more effective.
It’s because of the combination of those good things like locality and efficiency and shitty pay and low benefits.
Working in an auto plant in our beloved South now gets you pay rivaling, not exceeding, other jobs not in high tech manufacturing.
So, yay, now we’re more competitive than ever, in the way that the South was competitive against Northern textile manufacturing workers in the late 1800s, and in the way that Mexico and then a succession of ever poorer nations were against Southern textile workers.
No doubt, as many sane policies should be enacted as possible. There won’t be a New Deal III, but if there were we would still find ourselves in a very different situation than the mastery of the world ‘we’ were in after WWII.
The corporate classes turned back into class-war mode to roll back New Deal and WWII labor and middle class gains at the end of the 1960s because they could, and they’ve been very successful at it along with their Segregationbircher friends and representatives in the Republican Party and their smooth insider reasonable ‘expert’ advisers throughout the Democratic side.
For decades in South America policies could have been followed which did more than allow a near majority to either starve or nearly starve, if not for the policies our successive governments forced upon them or heavily subsidized.
The point of this being mentioned here is not so much that South America’s first true independence gained since the late 1990s changed policies to begin to develop their own population and nation.
The point is that they got by for generations with a super-rich paper-thin super-elite enjoying themselves on top of an orange-skin thick layer of professional and technical workers serving them on top of a phone book thick stack of working peoples, themselves nervously scrambling for footing on top of a similarly thick layer of the brutely poor, and all lovingly drizzled with foreign investor maggots.
If they can get away with it, our upper class dominated establishment might do the same. And that group in each nation can point to another nation to declare that it’s not their fault, it’s the situation, it’s so delicate and changing and modernizing and so forth.
Hell, we’re not even protected from the sorts of super-imaginary trillions of dollars of play derivatives money games which could be stacked up so delicately only to collapse again.
This isn’t doom and gloom, though there is a good chunk of doom and good sized portion of gloom remaining on the table. It’s about a notion of a “sustainable economy” meaning more than one which is more ecologically sensible, but one in which it’s just not okay to find much of or even most of us (i.e., the workforce) as sliding toward irrelevance.
Marginalized for stating documented facts
As I’ve been predicting for more than a year, and as anyone with a functional cerebellum could see coming.
When the stimulus ran out, with no new government spending, a recession became inevitable. The original stimulus was much too small, and Obama’s foolish decision to freeze all except military spending sealed the deal. Of course congress and that idiot Ben Bernanke deserve vast amounts of scorn and condemnation too. Bernanke’s refusal to raise Fed inflation targets has savaged the economy, and of course the gross irresponsibility of the Tea Partiers has richly earned them the necktie parties which we may only hope their newly unemployed constituents give them soon.
But of course this only represents the start of the perfect storm. Wait till Europe tips over the edge of Niagara falls and slides down into the abyss, dragging the rest of the world economy with it.
As I’ve said before and will say again (being called “insane” and “crazy” and “in need of therapy”), this isn’t just another recession. It’s the cracking-apart and final collapse of the economic system put in place after WW II to handle both domestic and international economic transactions. Automation + Peak Oil + global warming have changed the game, and from here on in, something new will have to take the place of capitalism as we have known it. I don’t know what it will be, but the same old capitalist system doing the same old things ain’t gonna cut it.