Surprise, surprise…
The U.S. lost 80,000 jobs in March – the biggest monthly loss in about five years, as the unemployment rate jumped to a three-year high of 5.1%.
While economists had predicted a net job loss, they didn’t expect it to be this bad. Unfortunately, it’ll only get worse.
At the same time, U.S. loan delinquencies are at a 16-year high. I’m shocked. Really I am. According to the American Bankers Association, 2.65% of all bank loans are 30-day delinquent… and that was just in Q1 2008. It’s the highest since 1992.
At the same time, home equity loan delinquencies nailed a two-year high. And delinquencies on lines of credit just hit levels not seen in 11 years.
And it’s all thanks to the worst housing meltdown since the Great Depression. You don’t say.
So, are we in a recession yet? Yeah, but don’t tell economists, Bernanke or Bush. They still think we’ll avoid it.
But we’ll have to agree to disagree. Though it’s tough to discount a recession when:
- Record numbers of Americans are receiving food stamps, which could reach an all-time high of 28 million by year end.
- The average number of Americans filing for unemployment benefits hit a two-year high of 2.824 million.
- Construction spending fell for the fifth month.
- Manufacturing activity dropped 0.3% in February, reflecting weakness in home building and non-residential activity.
- Consumer spending ticked up a scant 0.1%. Remove inflation and the numbers were flat.
- Payrolls put in a third month of negative jobs growth.
- The Chicago Fed National Activity Index sank to -1.04 in February, as January and December were revised lower. Worse, says Merrill Lynch, "The three-month moving average, which is a better gauge for national activity, is now below the -0.70 threshold that indicates a recession for two months in a row. This supports our view that the recession began sometime late last year to early this year."
Listen, I’d love to sit here and be economically positive, but that’d be a stretch.
Three months into the last recession, not one economist accurately predicted a recession in a survey. Unfortunately for their credibility, later evidence pointed out that a recession had begun at the time of the survey.
The Oracle of Omaha thinks we’re in a recession. The CEO of Caterpillar thinks we may be in one. George Soros believes this is the "worst market crisis in 60 years."
JP Morgan chairman and CEO Jamie Dimon thinks America’s in a recession… as do 71% of the 51 respondents in a Wall Street Journal poll. Poll respondents also felt there was a 48% chance "that the 2008 downturn could be worse than what was felt in the early 1990s and in 2001."
Even Well Fargo CEO John Stumpf says, "It is now clear that the U.S. and global financial markets are experiencing their worst financial crisis since the Great Depression."
Sadly, the Fed’s thinking only mirrors that of past recession ignorance from the Fed. According to "Booms, Busts, and the Role of the Federal Reserve":
When the recession started in April 1960, we heard:
"By and large, however, the economy seems quite solid."
Federal Open Market Committee, May 1960
"[Chairman Martin] was by no means convinced that the situation was serious."
Federal Open Market Committee, July 1960
"The Chairman reiterated his views … There was a declining picture, … but the economy was not going over a precipice by any means."
Federal Open Market Committee, October 1960
When the recession started in July 1990, we heard:
"In the very near term there’s little evidence that I can see to suggest the economy is tilting over [into recession]."
Chairman Greenspan, July 1990
"…those who argue that we are already in a recession I think are reasonably certain to be wrong."
Greenspan, August 1990
"… the economy has not yet slipped into recession."
Greenspan, October 1990
