News

The Recession Will End… Wait, It Already Did

Says who: Christopher Rupkey, the New York-based chief financial economist at Bank of Tokyo-Mitsubishi UFJ

“Consumers and businesses have postponed purchases for six months, the population is still growing about 1.2% per year, and if the unemployment rate is close to peaking, then growth may be firmer than expected in the second half of 2009.” [Rupkey] points to a series that in the past has proven a remarkably good indicator of business cycle troughs: weekly claims for unemployment benefits, [which] … peaked in the week of March 28. (via WSJ)

Why it might be crap: Sounds a little like the aftermath of 9/11, no? “I encourage you all to go shopping more,” George W. Bush said in 2001. Looking at the indicators themselves, there’s disagreement over when Americans will return to the malls in force, or when housing starts will improve, or even whether unemployment has bottomed out — considering how much of a surprise last month’s number was, and the fact that many are predicting the rate will move comfortably into the double-digits.

Why it could be true: If the population is like Recessionwire co-founder Sara Clemence, there’s a lot of pent-up spending urges out there ready to pop. And with the savings rate at a healthy 8 percent, consumers are indeed sitting on dollars they can push into the marketplace.

Our call: The determining factor is confidence, and we’ve seen collective confidence move from fear earlier this year to some relief in the spring months as the eye of the storm seemed to pass. But as overall conditions remain weak, or slow to improve, at best, that confidence will likely impair spending. So we think Rupkey’s wrong.

Tags: downturn, economists, economy, recession, recovery, The Recession Will End...