Lakshman Achuthan: The Economy is in Recession Now

By on July 10, 2012

Bloomberg’s Tom Keene interviewed Lakshman Achuthan of the Economic Cycle Research Institute (ECRI) yet again regarding his predicted recession (see interview from December 2011).

Achuthan said he believes the economy is in recession now. He said it’s rare to know you’re going into recession as it often takes some “big hit on the top of the head…in the last recession it took Lehman to wake people up…in the recession before it took 9/11.”

Keene questioned Achuthan how he defined recession being that the typical definition is two negative quarters of GDP growth. Achuthan said the definition of recession, or what a business cycle is, established by his mentor Geoffrey Moore, which in turn was established in the 1920’s by Moore’s mentor Wesley Mitchell, is that recession is a process between production, employment, income and sales. When you look at those four measures they are rolling over, Achuthan stated.

Achuthan said recession is a vicious interplay between output, income, employment and sales. He pointed out 2001 where there weren’t two quarters of negative GDP growth, but 3 million jobs were lost and the NASDAQ lost half its value. “How do you tell someone we weren’t in recession?,” questioned Achuthan.

When you look at today’s data, industrial production is off its April high, manufacturing and trade sales, which are much broader than retail sales is off of its December high, Achuthan pointed out. Real personal income growth, which doesn’t always go negative during a recession, has been negative for several months so it’s consistent with a recession having already started, added Achuthan.

The interview continued with Achuthan discussing how other economists are misinterpreting the recession as a slowdown, a review of the ECRI weekly index, what the relative optimists get wrong in economics today, the misplaced faith in the Fed and other central banks and their powers to prevent a recession, why the U. S. is struggling to generate growth in GDP output, the contributing factors leading to net job losses, and when we’ll see negative GDP and net job losses in this recession.

One Comment

  1. Tommy Voeckler

    July 11, 2012 at 2:48 pm

    Laxman’s being too broad and vague in his definitions. He can claim a recession when there is a simple slowdown. How he gets away with this without Tommy Keene calling him on the carpet is mystifying.

    Have to give him some credit though since the economy appears to be much weaker than the mainstream economists have been predicting.

    Recessions, by the standard definition (2 quarters of negative growth) are very rare and it isn’t very likely we’ll see one this year.

    And please, would people stop using the term ‘double dip.’ We’ve been in recovery for some time now and past the point where a recession would considered a second dip.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>