In a Sea of Optimism, Why Some Forecasters Warn of Recession

Talk to just about any economic forecaster on Wall Street, and you'll probably get a relatively upbeat assessment of U.S. economic outlook. They'll tell you that business investment and manufacturing output are bouncing back and that housing might be less of a drag on growth, trends that suggest the worst of the slowdown is behind us.

But outside the mainstream -- and, in most cases, far away from Wall Street -- a small but vocal group of pessimists says the consensus view is wrong and that the economy is getting weaker -- so weak that it could actually be in a recession right now.

"We're falling off a cliff," said James F. Smith, chief economist at Parsec Financial Advisors in Asheville, N.C. Mr. Smith predicts that the U.S.'s inflation-adjusted gross domestic product -- the widest measure of economic activity -- contracted at an annual rate of 1.4% in the soon-to-end second quarter and will shrink 2.6% in the third quarter before rebounding to nearly 5% growth in the fourth quarter.

...

There are some common themes behind these bearish forecasts, including the inverted yield curve, an unusual occurrence in which short-term interest rates are higher than long-term rates. An inverted yield curve is often considered a harbinger of trouble for the economy.

Although the yield curve between three-month Treasury bills and 10-year Treasury notes returned to a more normal state a few weeks ago after being inverted for nearly a year, the pessimists say the inversion is meaningful. According to Mr. Smith, each of the past 17 times the yield curve was inverted for four months or longer there were subsequent recessions. "It's a perfect indicator," he said, contributing to his view that the U.S. economy likely slipped into recession "sometime in mid-May."

http://online.wsj.com/article/SB118272733719546523.html?mod=economy_lead_story_lsc


I thought we had been in a recession since 2000.....

because making more shit isn't the problem. The problem comes with where they think they're going to sell the shit they've made.

Decades of offshoring good paychecks while onshoring all the bills are catching up with us, I'm afraid. Sales are down for all but the luxury market.

If you're in the bottom 80% (some would say 90%) of wealth holders, the recession has never lifted. It's a race to the bottom for people who are facing inflation on stagnant wages. That new TV is just going to have to wait, the car needs gas and the kids need school clothes and everybody's getting sick of mac'n'cheese.

People aren't as willing to take on more debt now because their main asset, housing, is not rising to cover that debt. Debt has been keeping this economy afloat for over 10 years and housing has now caused it to spring a leak.

Wall Street wonks have never recognized that 2/3 of this country's economy has always been the consumer sector and that pressure on that will eventually kill the goose that lays the golden eggs for the rich. I am terribly afraid that's the lesson they're about to be confronted with--again--and probably fail to learn--again.

are looking (the optomists) but it sure seems clear here on the ground.