05/28/09 Baltimore, Maryland We’ve entered the next stage of the sucker’s rally.
First the data became “less awful.” Then the market rallied. Now – lo and behold – prominent economists are competing with each other to be the first to call the bottom. At the head of the pack, this fellow:
That puppy-choking economist is Robert J. Gordon, one of the seven members of the Business Cycle Dating Committee at the National Bureau of Economic Analysis. In less stuffy terms, he’s one of seven folks who officially declare the beginning and end of a recession.
Just recently, he unofficially called the end of the mess we’re in. At the crux of his argument is this chart:
Gordon notes that, in the week of April 4, the four-week moving average in initial claims peaked. Thus, if this recession is like the last few, we’re through the worst of this downturn.
But is it? Hard to believe jobless claims in the “worst downturn since the Great Depression” won’t surpass those of the early ’80s. And even Gordon himself (proof that this guy is a worthy economist) says, “Probably, we’re going to be wrong.” Whether he’s called it or not, we’ll keep an eye on this unemployment claims trend… should be interesting.
With that in mind, initial claims for unemployment benefits declined again this week, to “just” 623,000. The four-week moving average has almost flat-lined around 626,000.
Continuing claims – those seeking unemployment benefits for more than one week – set another all-time high. 6.78 million Americans are on Uncle Sam’s jobless tab, the 17th consecutive week of record highs.
“Past business cycle recessions have ended in a matter of months after peak IUCs are in place,” notes our macro adviser Rob Parenteau, echoing Gordon, “so we continue to target Q4 2009 as the most likely first positive real GDP print. The unemployment rate typically keeps rising for three-four quarters after IUCs have peaked, and we would not be surprised if manufacturing job losses remain heavy into 2010.”
The National Association for Business Economics is calling for the recession to end in the second half of 2009. Its panel of 45 economists expects GDP to turn positive sometime in the second half and unemployment to peak in early 2010.
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How remarkable that ‘economists’ are saying what they’re paid to say. And when they’re wrong yet again, people will still listen.
It like the Realty board chairwoman on the news recently. She predicted a rise in housing prices by the end of 2009, well, “jes’ because.”
If you laid down every economist end-to-end they still would not reach a conclusion.