St. Louis Federal Reserve: There is now 100% chance of recession
The index has never approached 20% without a subsequent recession
During my usual morning reading process I came across a posting on PragCap by Cullen Roche regarding a chart of U.S. recession probabilities. The chart can be found at the St. Louis Federal Reserve website and is derived from a study by J. Piger and M. Chauvet, from the University of Oregon, which was published in the Journal of Business and Economic Statistics in 2008. (For other economic geeks the full paper is attached)
Cullen points out that “What’s interesting about this index is the current reading. At 20%, the index is at a level that has ALWAYS been followed by a recession. As you can see below, the index has never approached 20% without a subsequent recession. All 6 recessions since 1967 have coincided with 20%+ readings in the US Recession Probabilities index.” Currently, that index, as shown in the chart below, is approaching that 20% level as of August which is the latest reported data.
From the NBER Website: “The NBER does not define a recession in terms of two consecutive quarters of decline in real GDP. Rather, a recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”
As stated above, each time this indicator has signaled the probability of a recession at 20%, or higher, the economy has either been in, or was about to be in, a recession.
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Employers Post Fewest Jobs in Five Months as Hiring Rate Also Slips
MIT’s Greenstone: Middle Class Worse Off than Most Realize
Recession Very Possible in Q1 of 2013
Report: Fiscal Cliff Might Kill 6 Million Jobs as Unemployment Nears 12%
Unless Congress acts before January, the fiscal cliff will eliminate almost 6 million jobs and send the unemployment rate to near 12 percent, the study warns. About $100 billion in spending cuts and about $400 billion in tax increases will go into effect in January unless Congress acts.
Anticipating the fall-out, companies are laying off workers, not filling jobs and delaying investments. Fear of the fiscal cliff has wiped out nearly 1 million jobs this year alone, the NAM study, called “Fiscal Shock: America’s Economic Crisis,” claims.
“The worst could be ahead,” the report warned. “If the fiscal contraction happens, the economy will almost certainly experience a recession in 2013 and significantly slower growth through 2014,” the report said.
Marc Faber: 100% Chance of Global Recession
Recession 2013: Washington Policies and CBO’s Recession Forecast
The Congressional Budget Office (CBO) forecasts a recession for 2013. Forecasters rarely anticipate a recession. Almost by definition, recessions surprise. Some unexpected force or forces conspire to so disrupt the economy that it contracts.
What makes this recession different, and predictable, is that the disruptive force is Washington policies and, even more, Washington behaviors—policies and behaviors for which the nation can thank the Congress and especially President Obama. The policy is Taxmageddon. The behavior is intentional, insistent inaction. The consequence is recession. The response should and will be outrage.
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Mainstream Forecasters Rarely See Recessions Coming
Economic forecasters almost never forecast recessions. Those few who do forecast recessions do so with great frequency and belong to the doom-and-gloom school of economics. Like a broken clock, these forecasters are occasionally right—not from analysis but merely by dint of repetition.
CBO is not one of these. Like most mainstream forecasters, CBO has forecasts that tend to show the economy moving toward its trend growth path. The difference among forecasters is typically with respect to the speed at which the economy returns to full employment. The bold have the economy recovering sooner; the more pessimistic have the economy reaching full employment later. There are also typically minor differences in forecasts of inflation and interest rates.
For most, forecasting a recession is entirely out of character. Yet CBO forecasts the economy to slow from 2.2 percent growth in the second half of 2012 to a –0.3 percent contraction for all of 2013. Why? Taxmageddon and the fiscal cliff. As the Financial Times noted in its editorial of September 22 of this year, “Despite an increasingly anaemic labour market, Congress is failing to stimulate the economy and address the ‘fiscal cliff’ of expiring tax measures and planned spending cuts, which could plunge the U.S. back into recession.”[1]
CHINA: Global Recession Certain – CCTV
http://english.cntv.cn/program/bizasia/20111121/110054.shtml
Sprott strategist Embry: Why 2013 could be “one of the ugliest years on record”
From King World News:
Here is what Embry, who is chief investment strategist at Sprott Asset Management, had to say about about what is taking place:
“I think we will see the first manifestations of the negative aspect (of money printing in 2013). To date, money velocity has been falling because even though all of this high-powered money is being stuffed into the market by these central banks, the banks and the public really can’t seem to get the lending mechanism working.”
“The banks are afraid, and the public is over-indebted. But I think that will just make them push QE even harder, and at some point there will be a collective realization from all these people that are holding bonds and cash, etc., that ‘My God, the money is being destroyed. Get me out.'”
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Treasury: ‘Extraordinary Measures’ Needed as Debt Limit Nears
(CNSNews.com) – The U.S. Treasury quietly warned at the end of a statement issued last Wednesday that it expects the federal government to hit its legal debt limit before the end of this year–which means before the new Congress is seated–and that “extraordinary measures” will be needed before then to keep the government fully funded into the early part of 2013.
