2008 Recession Call: Increasingly Difficult to Avoid

The scales continue to tip in favor of our Recession call (Yo! Jimmy P!). Three recent comments suggest as much:

1) Macroeconomic Advisers have been reluctant to make the recession call. They now estimate that economic output declined at a 0.5% annual rate in April (gross domestic product). The April decline followed an annualized gain of 4.5% in March, a decline of 10.1% in February and a 7.5% gain in January.
Macroeconomic Advisers uses a model  based on the BLS formula for quarterly GDP. (Source: Real Time Economics)

2) Building on the MacroEconomic Advisers monthly database is Merrill Lynch’s David Rosenberg. In note late Tuesday, David writes "The recession in GDP is here – but it’s in the monthly data, not the quarterly data. The MacroEconomic Advisers monthly database shows that real GDP dipped at a 0.5% annual rate in April and has contracted now in two of the past three months.

Note that since January, the month we had been saying for some time that represented the peak of the business cycle, real GDP has declined at a 2.2% annual rate. So, do not be fooled by that 0.9% first quarter GDP print – it is masking an erosion in activity beneath the veneer of quarterly averages. (Source: David A. Rosenberg, Merrill Lynch)

3) Martin Feldstein says the U.S. is "Slipping into recession." Normally, we do not weight any single person’s viewpoint all that heavily. But Feldstein is the  chief of National Bureau of Economic Research, the group that actually dates recession in the U.S.

And, since he is retiring this year, this is as much as any NBER Chair ever tips his hand on the NBER recession call.  (Source: Bloomberg)


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  1. bluestatedon commented on Jun 18

    hmmmmmm… pretty grim prognosis. This guarantees there’ll be a 200pt rally in the Dow tomorrow.

  2. gregh commented on Jun 18

    When are we gonna have that can’t miss stock market crash? I’ve convinced myself that a recession means a huge drop in all the majors but i’m guessing the duration of the recession will be the new hot topic that helps point the direction of the indexes…

  3. pablo commented on Jun 18

    what I dont understand . is why the naysayers cant acknowledge that the ‘slowdown’ is not even keeping up with population growth ……..which actually makes are economy in recession !! thats without even considering questionable inflation #’s!

  4. Vermont Trader commented on Jun 18

    The 2008 recession – sponsored by The Travelers. I love feedburner.

  5. Arthur commented on Jun 18

    For the first time in a while I caught a few minutes of The Great Denier’s [Larry K} show this evening. The mood was kinda sour. Seems to me Larry’s close to throwing in the towel on the whole R thing, but not before blaming it on the prospect of Obama.

    Not so long ago I thought “the end was nigh”; then I came to see that as imprudent, thinking a more slow-motion implosion scenerio was credible. Now I’m leaning strongly back to the “nigh” camp; the rivets aint gonna pop off this mutha one at a time.

    Barry, it’s your blog and I understand you have more than just a friendly bet at stake on the outcome of this statistical skirmish over R/no R but I for one am ready to move on trying to figure out “how do I survive/profit from the coming ‘negative growth’ (outside no-brainers gold, ngas and cash).”
    Given what we think might unfold in the nearish term what do we think about the prospects for emerging markets, for example? Are things likely to get plenty worse there (man o man, look at Vietnam’s exchange) or are we close to “opportunity” levels? Best, and please keep up the excellent work.

  6. rickrude commented on Jun 18

    I like this recession cause my oil investments are bringing me elation.

  7. Mike in NOLA commented on Jun 19


    Why do you have to only think long? There are plenty of short ETF’s out there.

    SKF has been good the past few weeks. Trouble was I took my first position in March and had to ride it down and back up. But it’s there are no margin calls so you can be patient if you know you’re right about the liars. Of course, I knew :) But I did underestimate the ability of Larry K et al to convince the herd that we had passed the bottom. Not being easily cowed, I hung on.

    It’s now up 10%, which ain’t bad for 3 months. In my other account, I bought some in April when it was bottoming and that position is now up almost 30%. I think the SKF doesn’t have a lot farther to run, but there are others that haven’t moved a lot yet.

    I think the short materials ETF’s could be good next, although there aren’t a lot of choices. Tonight China has lost that big gain from last night and then some. I can’t believe the commodity prices will stay this high.

  8. Darkness commented on Jun 19

    Feldstein is over in the wapo today arguing that the government should bail homeowners out of the upside down portion of their mortgages. Quick, quick, before prices fall further. He fears that through some unknown and undescribed mechanism that prices will re-adjust (MY term) below where they belong through some kind of spiral. (As opposed to what is already happening, that former renters jump in when it is economically advantageous to.)

    So, I don’t know about this guy, no matter what power he has to call recessions. He wants to keep housing out of reach of buyers wanting to enter the market for the first time, because the stupid ones who jumped in at the top are getting help from Uncle Sam. So, now anyone who wants to sell, can’t, because the government is forcing comps 20% too high and no one trying to get an honest loan can buy. So, then what? Should the government re-institute liar loans, or supplement everyone’s loans forever (saddling everyone with excessive debt) so these houses subsequently put on the market don’t fall empty for lack of affordability?

    MFeldstein: “I believe the federal government should create a firewall to prevent too great a fall in housing prices”

    What a bad idea. I’m dubious of this Feldstein guy’s thinking, personally.

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