On the U.S. economic front, there’s good news and bad news:
The good news is the U.S. is “not yet” entering a double-dip recession.
The bad news- we are headed toward a sharp and prolonged economic downturn.
…at least according to a Wall Street Journal interview with Lakshman Achuthan, co-founder of the Economic Cycle Research Institute, a well-respected economic forecasting firm that has a strong track record for identify turning points in the market.
Given fundamental weaknesses, such as:
- A feeble housing market
- Overall low levels of GDP growth
- High unemployment
- Rising Commodities
The market seems prone to further deterioration, powerless to resuscitate itself without a strong foundation.
Hence, ECRI is forcefully arguing that the current global industrial slowdown will be “pronounced, pervasive and persistent;” and that a rebound in the second half of 2011 is unlikely.
“It’s big and it’s not something you can deny,” Lakshman said.
However, he has not formally dubbed his claim a “recession,” which is defined by two quarters of economic contraction.
The primary difference between the slowdown that occurred a summer ago and today is the level of monetary (federal reserve) and fiscal (government) stimulus available to markets.
Last year, the Fed introduced its controversial $600 billion quantitative easing program scheduled for completion this month, just as the economy looses strength.
“The broad economy is going to slow alongside the industrial sector…it’s all going to be synchronized,” according to ECRI.
The 9.1% unemployment rate currently challenging the quantitative easing program and its future impact will seemingly become a hot topic as campaigning for the 2012 general election approaches and progresses.
ECRI expects the job growth will grow increasingly sluggish in the coming months.
“You’re not going to see the quarter of a million jobs [created] on average anytime soon” referring to the benchmark figure for sufficient employment growth.
Some are recommending that investors remain cautious and careful in chasing yield.
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