Krugman, Roubini, Calc. Risk: "De Facto Double-Dip" Is Here

[Joanne98]

Mon Jul 19, 2010 at 12:13:48 AM PDT
Paul Krugman, Nouriel Roubini and Calculated Risk are all talking about our "De Facto Double-Dip" recession this weekend. Whether an economic indicator is leading, coincidental or lagging--for all of those reading this that embrace the over-arching concept of political pragmatism--is immaterial to the political end result. Summing it all up into a theme I've been discussing for...years: When it comes to political realities, technical economic indicators mean quite little as far as the voters' perceptions of our (their) economic well-being are concerned. As Paul Krugman also reminds us this Monday morning, in "The Pundit Delusion," winning campaigns--especially in economic environments such as this and as I've also been reiterating it for years--is all about jobs/employment.

But, what does happen when many/most of the indicators start going south (or, at best, sideways), too? Again?

bobswern's diary :: ::
Meteor Blades covered some of this quite extensively, on Saturday, in his outstanding post: "The 'recovery' takes a few more hits." In it, he pointed out that many, if not most, of our economic indicators have been tanking for the past couple of months.

Previously, Kossack gjohnsit discussed these truths in: "The crash of the leading indicators." While others have attempted to rebut gjohnsit's commentary, with factual statistics supported by annotated data from many weeks ago, before much of our latest economic news was even available, the realities of the matter are that both gjohnsit's post and the post rebutting it have been focused around the highly-regarded Economic Cycle Research Insititute's Weekly Leading Indicators, or, the "ECRI's" "WLI," which has continued to plunge (since gjohnsit posted his diary, less than two weeks ago), abysmally.

In fact, as Reuters pointed out on Friday, and as Zero Hedge also elaborated upon it, the ECRI's WLI has sunk to a point where there is now a virtual 100% chance, based upon the ECRI's previous historical statistical fact (42 years of data), that we are all but assured of retracing some of our path downward, back into negative job creation--understanding that anything around a 2.0%-2.5% growth in our country's GDP, or less, assures this, since that translates into the truth that projected jobs created won't even keep pace with the growth of our employment population (combined with the Bureau of Labor Statistics' birth/death rate), from this point forward, well into 2011.

ECRI Plunges At 9.8% Rate, Double Dip Recession Virtually Assured
Zero Hedge
07/16/2010 09:48 -0500

The ECRI Leading Economic Index just dropped to a fresh reading of 120.6 (flat from a previously revised 121.5 as the Columbia profs scramble to create at least a neutral inflection point): this is now a -9.8 drop, and based on empirical evidence presented previously by David Rosenberg, and also confirming all the macro economic data seen in the past two months, virtually assures that the US economy is now fully in a double dip recession scenario."It is one thing to slip to or fractionally below the zero line, but a -3.5% reading has only sent off two head-fakes in the past, while accurately foreshadowing seven recessions -- with a three month lag. Keep your eye on the -10 threshold, for at that level, the economy has gone into recession ... only 100% of the time (42 years of data)." We are there.

Here's more from Paul Krugman, on Saturday, as far as the implications of all of this are concerned:
http://www.dailykos.com/storyonly/2010/7/19/885470/-Krugman,-Roubini,-Calc.-Risk:-De-Facto-Double-Dip-Is-Here

[On the Road]

1. Considering That the Leading Indicators

have correctly predicted 14 of the last 7 recessions, I would have to take issue with any claim that they are guaranteeing another one.

[dkf]

3. To the population it is sure quacking like a duck.

[dkf]

2. Double dip just before mid term elections

That is just great. Seriously wasn't healthcare a misplaced priority?

[Vincardog]

4. REAL health care reform would have helped displaced and under worked people a LOT

[xchrom]

5. It's not that our political leaders will be surprised but that they

Will act surprised and be forced to REACT.

[MannyGoldstein]

6. Also AllentownJake declared this two weeks ago

The dearly-missed former DUer wrote a piece on this:

July 2nd is the day the Double Dip arrived and can not be denied.

The BLS labor report was abysmal. Zero Hedge does a pretty good statistical argument that the U3 number should be 11.8% not 9.5% if it wasn't for our labor department statisticians disappearing people into the not in labor force category. The BLS report is great in you can pull some interesting information out of survey responses. It is a piece of shit in the fact that every US President since it was first released has played games in what the U numbers mean and how people are counted. The U numbers are meaningless propaganda tools now. I'm thankful they haven't taken the chinese approach though to outright creating data.

http://www.zerohedge.com/article/reversion-10-year-average-labor-force-participation-rate-implies-118-unemployment-rate

Manufacturing data is plummeting

http://www.businessinsider.com/add-falling-factory-orders-to-the-list-of-signs-the-us-economy-is-double-dipping-2010-7

Housing...well let me just say the housing starts reported the worst number since they created the survey. Existing sales are plummeting, and outside of Census workers that sector showed the most job losses in June.

Lastly the ECRI indicator is about to hit -10% historically when it hits that number a recession happens 100% of the time.

http://www.zerohedge.com/article/ecri-weekly-leading-indicator-ever-closer-10-threshold-drops-77-leads-another-leg-lower-stoc

there's more but I won't post it since I don't think it's mod-friendly.