Forecaster says recession is almost over
Thursday, April 30, 2009
April 30, 2009
Ali Velshi | Bio
CNN Chief Business Correspondent
One of America’s most reliable economic forecasters says the current recession – the longest in half a century - will end this year, possibly as early as this summer.
Lakshman Achuthan, Managing Director at the Economic Cycle Research Institute (ECRI), was one of the first to declare that the US was in a recession. Now he’s one of the first to say its ending. ECRI, he says, is the research group in the world that studies business cycle recessions and recoveries for a living, and has a near-perfect record of predicting. They do it by crunching various pieces of data and creating “leading indicators” which show where the economy is headed
The indicator that looks the furthest into the future actually started showing signs of future growth as early as last November, as the worst of the credit crisis started to ease. Another indicator, with a shorter lead-time into the future, started pointing toward growth in early December. Both indicators have showed steady growth since then and that, says Achuthan, is enough data for him to say this recession is ending. That’s because, over the last 75 years, when those indicators turn up, the recession ends within four months. No exceptions, says Achuthan.
Achuthan points out that these same indicators predicted the current recession, by turning downward BEFORE the recession began. Specifically, Achuthan notes, his leading indicators turned downward in Early June, 2007; the current recession “officially” began in December of that year. Because of that, Achuthan was able to announce that the US was in recession some NINE MONTHS before the National Bureau of Economic Research, which is the official arbiter of recessions, did.
But don’t buy the party supplies just yet. The end of a recession simply means that things will start becoming “less negative.” A top adviser to President Obama says the economy will again shrink in the 2nd quarter of this year – that’s the period we’re in now. But Achuthan declaration doesn’t really counter that – he doesn’t think recovery will start until the 3rd quarter – sometime after June.
But how do you have a recovery if job losses continue? The Labor Department says 6,300,000 people are now drawing unemployment benefits – that’s a record. And a number greater than that are unemployed but NOT collecting benefits, because their benefits have run out.
Achuthan worries that during a recession, we all become more productive, by working with less (we fill in when our colleagues are laid-off, for instance), and so you don’t need to hire all of those people back for the economy to recover. The danger of that is that many millions of people who have lost their jobs may not get them back in this economy – and that can create great disparity in society – “haves” who have more; “have nots” who have less.
(Source:http://ac360.blogs.cnn.com/2009/04/30/forecaster-says-recession-is-almost-over/)
Ali Velshi | Bio
CNN Chief Business Correspondent
One of America’s most reliable economic forecasters says the current recession – the longest in half a century - will end this year, possibly as early as this summer.
Lakshman Achuthan, Managing Director at the Economic Cycle Research Institute (ECRI), was one of the first to declare that the US was in a recession. Now he’s one of the first to say its ending. ECRI, he says, is the research group in the world that studies business cycle recessions and recoveries for a living, and has a near-perfect record of predicting. They do it by crunching various pieces of data and creating “leading indicators” which show where the economy is headed
The indicator that looks the furthest into the future actually started showing signs of future growth as early as last November, as the worst of the credit crisis started to ease. Another indicator, with a shorter lead-time into the future, started pointing toward growth in early December. Both indicators have showed steady growth since then and that, says Achuthan, is enough data for him to say this recession is ending. That’s because, over the last 75 years, when those indicators turn up, the recession ends within four months. No exceptions, says Achuthan.
Achuthan points out that these same indicators predicted the current recession, by turning downward BEFORE the recession began. Specifically, Achuthan notes, his leading indicators turned downward in Early June, 2007; the current recession “officially” began in December of that year. Because of that, Achuthan was able to announce that the US was in recession some NINE MONTHS before the National Bureau of Economic Research, which is the official arbiter of recessions, did.
But don’t buy the party supplies just yet. The end of a recession simply means that things will start becoming “less negative.” A top adviser to President Obama says the economy will again shrink in the 2nd quarter of this year – that’s the period we’re in now. But Achuthan declaration doesn’t really counter that – he doesn’t think recovery will start until the 3rd quarter – sometime after June.
But how do you have a recovery if job losses continue? The Labor Department says 6,300,000 people are now drawing unemployment benefits – that’s a record. And a number greater than that are unemployed but NOT collecting benefits, because their benefits have run out.
Achuthan worries that during a recession, we all become more productive, by working with less (we fill in when our colleagues are laid-off, for instance), and so you don’t need to hire all of those people back for the economy to recover. The danger of that is that many millions of people who have lost their jobs may not get them back in this economy – and that can create great disparity in society – “haves” who have more; “have nots” who have less.
(Source:http://ac360.blogs.cnn.com/2009/04/30/forecaster-says-recession-is-almost-over/)
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