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May 24, 2001

Evidence Keeps Piling Up

The Economic Cycle Research Institute released a study which declares that the US is already in the middle of a recession. The last time they made this claim was in February 1990, just months before the economy officially slid into a recession.

Here are some of the Institute's latest findings:

  • Industrial production has fallen for seven consecutive months -- that has never happened without a recession in progress.
  • A two month drop of 0.2% in total employment has not been seen in the last four decades except during a recession.
  • Such a large drop in manufacturing, trade, and retail sales without a recession has seldom been seen in the last half century. The only two exceptions were instances when recession followed a year later.
  • Though personal incomes have not posted significant declines, this was also the case during five of the last nine recessions either.
And they dispelled some myths:
  • A positive GDP in the first quarter says nothing about whether a recession is already in progress. For instance, a recession starting in March would show that GDP expanded in the first quarter as a whole.
  • A low initial unemployment rate has never prevented recession from occurring.
Just today, more evidence of recession cropped up. Sales of new homes plunged 9.5%, the biggest drop in four years. And unemployment lines grew longer as the number of people remaining on unemployment rolls reached its highest level since June 1994.

Investors have been blinded by rose-colored glasses in recent months, but they won't be able to ignore these factors for long.

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