The US economy is slowing down rapidly. In fact, according to the Economic Cycle Research Institute (ECRI), America is in already in recession.
In an interview with Tom Keene on Bloomberg Television on 10 July, the co-founder of the US based research firm, Lakshman Achuthan, said, “I think we are in recession already”. He went on to say that “It’s very rare that you know you’re going into recession, when you’re going in to recession. It often takes a big hit on the head – in the last recession it took Lehman to wake people up, and in the recession before it took 911.”
The official definition of a recession is two consecutive quarters of negative GDP, however ECRI argues (correctly in my view) that a “recession is not a statistic, it’s a process”, and they track four key areas: production, employment, income and sales.
In the interview Mr. Achuthan said, “When you look at those four measures, they’re rolling over… when you look at the data today, you see industrial production is off its April high. Manufacturing and trade sale (much broader that retail sales) is off its December high. 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.”
The ECRI view is supported by the unemployment data
The ECRI’s call that the US is already in recession won’t come as a surprise to the 8.2% or 12.7 million Americans who are out of work. Of those 12.7 million people, 41.9% are considered “long-term unemployed”, in other words they have been out of work for 27 weeks or more.
Equally staggering is the unemployment rate among teenagers which is now 23.7%, and these figures are based on the official U3 unemployment figure.
The less widely quoted but broader U6 unemployment figure, which includes those who can only find part-time work and those who haven’t looked for work in the past four weeks, is currently 14.9%.