The Right Opinion

Are We Already in a New Recession?

Much of the economic data say yes.

By Arnold Ahlert · Jan. 4, 2013

On Sunday, President Barack Obama contended that the nation is “poised to improve economic growth in 2013, but what's been holding us back is the dysfunction here in Washington.” Obama is certainly correct about the dysfunction in our nation's capital, but whether America's economy will be heading in the right direction next year is beginning to resemble the “recovery summer” talk from a couple of years ago that turned out to be just that: talk. Furthermore, based on recent economic data, some economists believe the U.S. is already in another recession.

“The evidence is starting to mount a recession is already underway, and we're a few months into it," contends Lakshman Achuthan, co-founder of the Economic Cycle Research Institute (ECRI). Despite economic growth of  2.7 percent in the third quarter, he believes July was the month when the new recession began. Achuthan bases that call on data released by the National Bureau of Economic Research (NBER), noting that three of the four indicators NBER uses to forecast downturns – production, incomes and sales – all peaked in mid-summer. He characterizes the improving employment number as the "odd man out,” but insists that “jobs are going to turn down and join the other indicators in their downturns,” further noting that the slight increase in jobs and GDP is “not inconsistent” with historical patterns that show both indicators have often improved at the start of recessions.

Achuthan's take on the jobs number is technically correct, but it omits one of the inconvenient realities that was glossed over during the presidential election campaign. Much of the media were more than willing to trumpet the drop in the official unemployment rate to 7.7 percent in November, down from 7.9 percent in October. Less trumpeted was the drop in the labor force participation rate, which declined from 63.8 percent in October, to 63.6 percent in November. Since 2009, the labor force participation rate has declined by 3.5 million Americans, who have simply given up looking for jobs. As a result, they are no longer included as part of the unemployment rate. If they were counted, the unemployment rate would be 10.7 percent.

Furthermore, for those Americans who believe government is growing at an uncontrollable rate, there is more disheartening news. reports that “621,000 new government jobs created in the last five months equal 73.3 percent of the 847,000 new jobs created overall,” citing numbers made available by the Bureau of Labor Statistics (BLS). The BLS also reports that “total nonfarm payroll employment for September was revised from +148,000 to +132,000, and the change for October was revised from +171,000 to +138,000. In other words, employment totals that figured prominently in the presidential election campaign during September and October were revised downward by 16,000 and 33,000 jobs respectively.

Then there's manufacturing, which has outpaced every other part of the economy since the recession officially ended in 2009, accounting for nearly 75 percent of the nation's domestic growth in the form of capital expenditures and exports. Once again, the data that this upsurge created 500,000 new jobs in the last two years was promoted by the president during the election campaign, even as two facts were obscured in the process. First, a total of 1.8 million manufacturing jobs have been lost since 2007, meaning there are still 1.3 million fewer people employed in manufacturing since the recession began.

Second, as Bloomberg News characterizes it, manufacturing has "essentially flat-lined since the end of the first quarter of 2012.” Several indicators are cited for this, including a decline in manufacturing activity for the fourth time in six months, the loss of 24,000 jobs since July, including 7,000 in November, an “unexpected” drop in exports, and a decline in new defense and transportation equipment orders in October. Moreover, the Federal Reserve reports that industrial production is an anemic 63 percent of what it was in 2007.

Another indicator that portends a recession is inventory. The U.S. Census Bureau's Advance Report on Durable Goods Manufacturers' Shipments, Inventories and Orders for July 2012 revealed that inventory stockpiles rose in July to $59.8 billion. That number represents the second-highest total on record, topped only by the $60.2 billion in stockpiles accumulated during the housing bust that led to the Great Recession. High inventories reflect one of two realities: either companies are expecting a sales boom – or current demand is lacking.

Bet on the latter, as reflected by the reality that holiday spending was up only 0.7% over last year, according to a report released by MasterCard. Other credit card spending totals are likely to be just as anemic, once again reflecting another erroneous prediction, courtesy of the National Retail Federation that expected a 4.1 percent increase in sales. Since consumer consumption still accounts for 70 percent of our economy, such numbers are alarming.

Yet there are far more alarming numbers. Food stamp usage continues to reach new highs, with 47,102,780 Americans getting assistance in the month of August 2012, another statistic released three days after the election. That's an increase of 15 million Americans since Obama took office in 2009, and it further reveals the stark reality that 1 in 6.7 Americans are now on the program. Another record-breaking number includes Americans collecting Social Security disability payments, which has soared to 8.8 million, resulting in a $47.8 billion deficit for the Social Security program in fiscal 2012. This number reveals another staggering statistic: for every 1.67 Americans working full-time in the private sector in 2011, there is now 1 person collecting benefits from the Social Security administration.

Unfortunately, during the election season and now, Americans have remain blissfully unaware – or willfully oblivious – to such trends. Part of the reason stems from the fact that the data used by economists to determine the course of the economy must be collected and analyzed over the course of several months, leading to a time-lag between the actual beginning of a recession and when it gets reported to the public. Another part is due to the president's highly successful class-warfare demagoguery: he has convinced a majority of Americans that taxing “the rich” is all that is necessary to get the economy humming again, and that we can “redistribute” our way to economic health and happiness.

Americans should note that all the statistics compiled here were amassed long before even the parameters of the “fiscal cliff” negotiations were outlined. Nothing agreed to earlier this week is likely to seriously alter the trajectory of our economy. We are either in a new recession, or we are in the “new normal,” of economic stagnation. That is the reality we are currently facing for the simplest of reasons: far too many Americans want big government, as long as “someone else” is paying for it. As long as that attitude persists, we'll all be paying for it, one way or another.

Arnold Ahlert is a columnist for FrontPage Magazine.


richard ryan in Lamar,Missouri said:

Excellent editorial, Arnold. I don`t think we`re in a new recession. I don`t believe we ever left the first one. The Obama enablers in the media, which includes most of them, kept hyping the idea that things were improving when they obviously were not. As for the 155,000 new jobs added in December, that number is a phony as a three dollar bill, and will no doubt revised downward by 50,000 or more in the next few weeks. On top of everything else we now have to contend with tax increases on every working American. I have a good friend who works at a grocery store here in Lamar, making only about minimum wage, which is $7.25 an hour here in Missouri, and an additional $5.00 has been deducted from his weekly pay check. A sign of things to come. There is no way this will not affect the economy.

Friday, January 4, 2013 at 12:09 PM

Wayne in Hinesville, GA said:

I can't believe the dumb-ass liberals didn't understand that taxes were going to go up on every person who draws a paycheck. Had one yesterday who tried to tell me that taxes only went up on the rich. Asked him to look at his first paycheck in Jan and see if the taxes were different than his last paycheck in Dec. Saw him this morning and he sheepishly said his paycheck was $16 less in Jan. It is totally amazing that these lunatics believe everything they see or hear in the lamestream media and never bother to check so see if the information is factual. Idiots deserve everything that's going to happen in the next 4 years.

Friday, January 4, 2013 at 12:42 PM

wjm in Colorado replied:

I had the same conversation with a former Democrat, who hates obamao, but claimed at least the tax was only on the rich. I told him to look closely at his next paycheck and get back to me. I will see my payroll deduction increase by 100.00 per month. The people have spoken, and must be punished!

Friday, January 4, 2013 at 1:32 PM

p3orion in Midland, Georgia replied:

As H.L. Mencken said regarding elections: "the common people know what they want, and deserve to get it good and hard."

Monday, January 7, 2013 at 4:04 PM

Tapdaddy in Indiana said:

" reports that "621,000 new government jobs created in the last five months equal 73.3 percent of the 847,000 new jobs created overall," citing numbers made available by the Bureau of Labor Statistics (BLS)."
The sad part about this statistic is that in order for those people to draw a paycheck the government must first take the money from people contributing to the economy.
What makes us think that these trends are sustainable?

Friday, January 4, 2013 at 2:11 PM

Tod the tool guy in brooklyn ny said:

I had a coworker say that he thought Mitt Romney would screw him over on taxes! I hope he wakes up and smells the coffee, kuz Obongo has more flexibility NOW!

Friday, January 4, 2013 at 5:34 PM

William in Florida said:

We must as responsible Americans open our eyes and take action!!! The govt. is moving quickly to suppress the people by taking away our means of defense (gun control) and freedom of speach ( requiring permits to picket or publicly demostrate) I recently read an article that stated;
An authoritarian nation is defined not just by the use of authoritarian powers, but by the ability to use them. If a president can take away your freedom or your life on his own authority, all rights become little more than a discretionary grant subject to executive will.

The framers lived under autocratic rule and understood this danger better than we do. James Madison famously warned that we needed a system that did not depend on the good intentions or motivations of our rulers: “If men were angels, no government would be necessary.”

Benjamin Franklin was more direct. In 1787, a Mrs. Powel confronted Franklin after the signing of the Constitution and asked, “Well, Doctor, what have we got — a republic or a monarchy?” His response was a bit chilling: “A republic, Madam, if you can keep it.”

Since 9/11, we have created the very government the framers feared: a government with sweeping and largely unchecked powers resting on the hope that they will be used wisely.

The indefinite-detention provision in the defense authorization bill seemed to many civil libertarians like a betrayal by Obama. While the president had promised to veto the law over that provision, Levin, a sponsor of the bill, disclosed on the Senate floor that it was in fact the White House that approved the removal of any exception for citizens from indefinite detention.

Dishonesty from politicians is nothing new for Americans. The real question is whether we are lying to ourselves when we call this country the land of the free.

Sunday, January 6, 2013 at 6:58 PM