Are We Already in a New Recession?
Much of the economic data say yes.
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. CNSNews.com 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.