Is the US Economy headed towards a recession?

Answer 1

In the short term, I'm not sure. Except for the housing market and mortgages, the economy seems to be humming along smoothly. How long it can keep it up, I don't know. Long term, I'm very concerned. The value of the US dollar looks like it will continue to decline. Eventually, we could be headed for another major depression. David Walker, the US Controller General (the government's top accountant), has warned about this. Here's a video from his 60 Minutes interview:

http://www.youtube.com/watch?v=KGpY2hw7ao8

Answer 2

The economy evidently ebs and move as referenced to the 4 year organization cycle. The fed, an autonomous administration of our economy seeks to stability inflation with boom. So contained in the start of a monetary decelerate is regularly appropriate to a help of expenses of pastime by the fed; although, there are cases even as the fed or the futile tries of congress are not to any extent further sufficient to appease the economy from a recession. aspect in case: As of immediately coverage mortgages agencies were/are threatening ridiculous losses, property proprietors (who irresponsibly borrowed funds lower than teaser expenses) are threatening default of their homes and banks are utilizing the fed because the lender because the spectacular hotel (a demonstration of disaster). yet another situation is that lot of credit can't be offered because banks in simple terms financially can't again them up. because monetary facilities, brokerages, coverage agencies are all operating lower than the sector of credit, this example will change right into a pervasive disaster, for this reason the the feds emergency seventy 5 foundation aspect cut back and the income tax refund (yet another ridiculous authorities attempt). enable's no longer overlook our problems with the dollar and the present accoun, yet it really is for yet over again.

Answer 3

Is the US economy headed for recession?

First one needs to understand that recessions are rarely ever predicted. For example, less than 10 percent of the Wall Street economists predicted the last recession, and most of those who claimed they did, did not say there was a 100% chance of a recession in 2001, but gave some kind of probability, that is, they said there was a 40% chance of a recession in 2001. The vast majority of economists were saying in 2000, that there was not going to be a recession in 2001.

And if you think about it, that makes sense, economists work for the government or financial institutions, so they have a vested interest in saying they see nothing but blues skys ahead. Those who have the best sources of information with regard to the economy have a vested interest in not giving an honest opinion with regard to where they think the economy is headed.

Bottom line, you need to decide for yourself. Most people don’t even care, but if you can predict a recession even within a few years, and start to back out of your stock investments before the pack decides to, you can definitely improve your returns over a long period of time. Furthermore, there are certain sectors of the economy that perform better or worse depending on where you are in the business cycle, a recession is the end or bottom of the business cycle, so having at least an educated guess as to when a recession may occur can really help.

Now I am going to try and answer your question.

Historically, in the 20th Century, a recession occurred every 5-6 years. More recently, since the Eighties they have occurred once every 10 years. Some say that is because the Fed, mostly Greenspan, is doing a better job. However, there is lot of data that suggest Greenspan simply wanted immediate gratification verses was in the best interest of the US over the long-term. That is, Greenspan kept interest rates low, and always dealt with problems in the financial markets with interest rate cuts, which may get rid of the problem in the short-term, but only make things worse over the long-term.

One could say that the longest time we go without a recession is about 10 years and the shortest has been less than a year, with the average 5-6 years. So since the last recession was 6 years ago, we must be getting close.

The fact that the Fed is cutting interest rates suggests you are at the end of the business cycle. If the Fed can get the rates correct, they may avoid a recession, and economic growth may again accelerate, and at some point the Fed would actually start to raise rates again. However, if the Fed cannot get the rates correct, we may go into recession.

The GDP growth has gone from about 4% in 2005 down to about 2% this year. You need 2 quarters of negative GDP growth in a row to officially be in a recession. So we are definitely, heading down, but depending on how good the Fed does its job and depending on how the economy reacts to the rate cuts will determine if we go into recession.

Note: the Fed is stuck between a brick and a hard place, meaning when Greenspan was face with a recession in 2001, the dollar index was at 120. Unfortunately, for Bernanke the dollar index is already down to 77, an all time low (the index was started in 1967, so that means the dollar has never been this low going all the way back to 1967). Meaning, Bernanke’s ability to cut interest rates without causing the dollar to decline even further is in serious jeopardy. He may not have enough strength in the dollar to lower rates much further. And if he cannot lower due to problems with the dollar then his ability to rescue the economy from recession is limited.

Now if you look at some other factors such as the housing market, which affects the vast majority of consumers and since consumers make up 70% of the economy, then that is another factor than suggest we are getting closer and closer to a recession.

Furthermore, the credit crisis is not over, and the credit crisis will affect housing, and the consumer more and more. Many people have talked about how resilient the consumer has been, but it has only been recently that housing prices have actually started to decline, yes, sales, which affect the realtors, have been falling for a couple of years, but the prices overall, have only recently started to fall.

If you look at job growth, during the Nineties job growth was on average about 250,000 new jobs a month, right now were lucky to do 100,000, they say that is still expansion, but you actually need about 150,000 jobs to handle those new workers coming into the economy each month, that is, there are about 150,000 workers seeking new jobs each month after subtracting those who leave voluntarily such as retirement. Again, this points to a slowing economy.

The manufacturing sector especially car manufacturing has actually been very close to already being in a recession, like the jobs numbers, the manufacturing sector suggest we are getting closer and closer to recession.

The dollar plays a part as well, many talk about how our exports, which is part of our GDP are doing great, but that is mainly because the dollar is tanking, making our goods look cheaper to foreign markets. If the dollar keeps tanking and foreigners start to pull more and more money out of our markets that will affect capital investment in a negative way. Again, that is not good for the economy.

There are polls done each month on the consumer. Consumer Sentiment at the peak of the business cycle is usually about 110; it is now about 80, during a recession about 60. Again, definitely heading towards recession.

Lastly, since the housing market is so important, one could look at the builder’s sentiment. During the 1991 recession it got to the low of 20, during the 2001 recession it got to a low of 45. Right now it is already down to 18. Again, pointing towards the fact that we are at the end of business cycle, meaning, what’s next, I think a recession within a year or so.

Answer 4

Yes

Answer 5

Like umbrellas, economies go up and down.Carpe Diem. Eat fish every day.

Answer 6

I don't think there is any doubt.

Answer 7

So it would seem...