Back in March I wrote that the U.S. commercial vehicle
market was signaling that a recession would begin sometime between July and
November of this year. The commercial
vehicle market is usually a superb leading economic indicator because changes
in freight growth first show up in how much new equipment is needed to haul
these goods.
But here it is November, and the current economic data indicates
an upturn, not a downturn, in the economy.
Why isn’t the commercial vehicle market a reliable indicator this time?
I’m not sure, but it’s certainly not alone.
I realized this as I studied a chart on year-over-year
change in employment growth (total employment by month) published by
calculatedriskblog.com. It makes sense
than when increases in employment start to slow, then the economy will stop
growing at some point. The concept is
similar to commercial vehicles, less total trucks needed to haul diminishing
freight, less total employees needed to do diminishing work. It has been a fairly reliable predictor of
past recessions, but not this time.
More enlightening is to review (Google) the headlines
predicting recession this year:
February – Recession – It’s Already Started
March – Economy Already In Recession
May – It’s Undeniable – The Recession Is Already Here
June – The Next Recession Is Already Here
August – This Graph Says It All – The Recession Is Here
August – Historical Data Will Show That U.S. Was In
Recession
September – U.S. May Now Be In A Recession
September – The U.S. Economy Is In A Recession
September – The U.S. Economy Is Coming Out Of Recession.
November – We Are Currently In Recession (This one was an
analyst on a cable business program)
All of these analyses were based on current graphs,
indices, models, and whatever, and certainly based on past trends. And according to current GDP data, these predictions
are:
Wrong
Wrong
Wrong – deniable
Wrong
Wrong – probably
Wrong – bad graph
Wrong - probably
Interesting, since we officially weren’t in recession
And probably wrong, but it’s too early to tell.
So, predicting a recession is difficult, even more difficult
than picking the winner of a big election. Forecasting a recession under the current
economic conditions is nearly impossible, and any analyst who correctly
predicts the next one is probably more lucky than good. Some traditional economic indicators remain
broken, inconsistent, and in many cases, unusable. These remain abnormal economic times.
But still, it is odd for all these economist and analysts
(and the commercial vehicle markets) to all be wrong. Could something else be happening here? Perhaps under these highly stimulated, highly
controlled, not yet fully recovered from the Great Recession conditions, this
is what an economic downturn looks like.
You can’t call it a recession, because GDP is not negative for two
quarters, but it is an “extended low growth dip.” That doesn’t roll off the tongue, maybe try
ELGD. It’s not difficult to spot it on
the graph:
Did regulation and controls prevent the economy from going
into recession? Well, communist
economies don’t go into recession very often because of the strict government
controls, so yes comrades, this may be the answer. That would indicate the largest free-market
economy is struggling to achieve 2% growth while the largest communist economy
is running up consecutive growth scores of 7.6%, 7.6%, and, yes, 7.6%. (Note to the Chinese government: It looks
very suspicious to repeat the same GDP % three times in a row. It looks like your economist took a long
vacation or that you are just making the numbers up. If one of my analyses came up the same number
three times in a row, I would employ the technique made famous by the noted
economist Reginald Fudgit and round one of the numbers up and another one
down.)
Therefore, maybe we had a recession and everyone missed
it! If so, we are out of it now, because
Q3 GDP is currently estimated to be 2.9%.
Suddenly the guy who said the recession, or maybe now the ELGD, ended in
September doesn’t sound so wacky now, does he?
Whoo Hooo! We just had a recession so mild that no one even
noticed it! There were no mass layoffs, employment even increased, and the
stock market didn’t tank! On the other hand, there will be no great snapback to
high growth, because there is nothing to snap back to. The economy is expected
to float back to around the 2% growth level. Oh boy!
The bottom line is, this economy is so docile that we can’t
even have a decent recession. There is
not enough air in the economy to produce a bubble worthy of being burst. However, about half of Americans just
indicated they were not satisfied with the status quo. Soon there will be a new economic sheriff in
town. I heard he has some business experience, so we will see what happens next.
This post first appeared on the FTR website. FTR is the leader in analyzing and forecasting the commercial transportation industry. For more information on FTR reports and services, please click here.)
