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New Research Suggests U.S. Already in a Recession That’s Only Getting Worse

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Recession

A Dartmouth professor warns not only has the United States slipped into a recession that is likely as bad as the 2008 financial meltdown, but that it is getting worse. David Blanchflower of Dartmouth, along with Alex Bryson, of University College London, “says that every slump since the 1980s has been foreshadowed by 10-point drops in consumer indices from the Conference Board and the University of Michigan” reports the Daily Mail.

The two professors authored a research paper released October 7 titled, “The Economics of Walking About and Predicting US Downturns” in which they state the dire prediction. “It seems to us that there is every likelihood that the US is entered recession at the end of 2021.”

In the paper’s ‘Abstract’ it states “the economic situation in 2021 is exceptional, however, since unprecedented direct government intervention in the labor market through furlough-type arrangements has enabled employment rates to recover quickly from the huge downturn in 2020.”

“However, downward movements in consumer expectations in the last six months suggest the economy in the United States is entering recession now (Autumn 2021) even though employment and wage growth figures suggest otherwise.”

In the introduction, the paper explains that “following the collective failure to predict the Great Recession of 2008 economists have redoubled their efforts to predict economic downturns.” This paper seeks “to see whether it is possible to predict turning points in the United States economy since the late 1970s using qualitative data for the United States from The Conference Board and the University of Michigan on consumer expectations.”

The research paper writes:

We identify four criteria to predict these recessions:
1.     Two out of three successive quarters of quarterly GDP growth are negative.
2.     There are two successive months of employment declines in the Current Population Survey (CPS) household-level data.
3.     The unemployment rate rises 0.3 percentage points in a single month.
4.     Either or both the two expectations measures we examine from The Conference Board and the University of Michigan fall by 10 points or more.

So, what is going on? The answer appears to lie in the exceptional nature of the COVID-induced shock to the economy. It has been both an economic shock and a health shock, and one with the potential to derail the economy again over the coming months. It seems likely that, in spite improvements in traditional labor market indicators, declining consumer expectations about the future of the economy are linked to COVID-related fears and anxieties. This is borne out by the survey by The Conference Board discussed above indicating a recent rise in the percent of workers – and especially women – worried about returning to the workplace for fear of contracting COVID- 19, a substantial increase from June 2021 when only 24% expressed this concern…

…We suspect that fears linked to COVID will continue to affect the real economy and lie behind consumer expectations about an imminent downturn in the economic situation. This is a bold call of course, and not consistent with consensus and only time will tell if we are right. However, equivalent falls in these data in 2007 were an early indicator of recession, missed at the time by policymakers and economists. There is a possibility of course, that these data are giving a false steer. However, missing the declines in these variables in 2007, as most policymakers and economists did, proved fatal. It is our hope such mistakes will not be repeated this time around. They missed it last time, hopefully, they won’t miss it this time. These qualitative data trends need to be taken seriously.

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1 Comment

1 Comment

  1. BlueBoomerang

    October 19, 2021 at 11:47 am

    Surprise, surprise, the US is heading into another recession a kin to 2008! Hidin’ Biden is president and America is reeling from crisis after crisis. Thanks to Slow Joe’s ‘social engineering programs’, the country is divided as hate rages between ‘the left’ and ‘the right’ or the ‘have nots’ vs. the ‘haves’. Thanks to Babbling Biden’s unprecedented spending of trillions of dollars to turn America into a socialist ‘utopia’, inflation is running rampant. The Fed will print money to spend like never before in history and the dementia-in-chief has the gall to say “It’s costing Americans zero”! However China is very happy! Xi can’t believe his good fortune.

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Economy

Biden Calls On FTC To Investigate Oil Companies Over Rising Gas Prices

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Gas Prices

President Biden has called on the Federal Trade Commission to investigate oil and gas companies over rising fuel prices, suggesting that the companies may be engaging in illegal conduct that results in the rising prices – despite Biden consistently enacting policies that restrict the domestic production of oil since entering office.

“I am writing to call your attention to mounting evidence of anti-consumer behavior by oil and gas companies,” the letter said. “The bottom line is this: gasoline prices at the pump remain high, even though oil and gas companies’ costs are declining. The Federal Trade Commission has authority to consider whether illegal conduct is costing families at the pump. I believe you should do so immediately.”

The letter added, “prices at the pump have continued to rise, even as refined fuel costs go down and industry profits go up. Usually, prices at the pump correspond to movements in the price of unfinished gasoline, which is the main ingredient in the gas people buy at the gas station. But in the last month, the price of unfinished gasoline is down more than 5 percent while gas prices at the pump are up 3 percent in that same period. This unexplained large gap between the price of unfinished gasoline and the average price at the pump is well above the pre-pandemic average. Meanwhile, the largest oil and gas companies in America are generating significant profits off higher energy prices.”

Gas prices have reached their highest level since 2014, and are currently about 50% higher than they were when Biden entered office.

“U.S. gasoline prices in October averaged $3.38 per gallon while U.S. oil prices averaged $81.48 per barrel, according to the U.S. Energy Information Administration,” the Wall Street Journal reported. “The last time U.S. gas prices reached similar levels in October 2014—$3.25 per gallon—U.S. oil prices were $81.40 per barrel. U.S. oil production sharply increased since last year to about 11.5 million barrels per day, according to the EIA, but is still well below pre-pandemic levels of around 13 million barrels per day.”

The letter comes after the Biden administration confirmed that it is considering shutting down an oil pipeline in Michigan, which would place further pressure on fuel prices to rise.

“Revoking the permits for the [Line 5] pipeline that delivers oil from western Canada across Wisconsin, the Great Lakes and Michigan and into Ontario, would please environmentalists who have urged the White House to block fossil fuel infrastructure, but it would aggravate a rift with Canada and could exacerbate a spike in energy prices that Republicans are already using as a political weapon,” Politico Pro reported. “Killing a pipeline while U.S. gasoline prices are the highest in years could be political poison for Biden, who has seen his approval rating crash in recent months.”

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Economy

Thanksgiving Dinner Will Be 14% More Expensive This Year

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Thanksgiving

As President Biden’s inflation crisis continues to worsen, the average cost of a Thanksgiving dinner will be 14% more this year than last year, according to the Farm Bureau.

The Farm Bureau noted, “The average cost of this year’s classic Thanksgiving feast for 10 is $53.31 or less than $6.00 per person. This is a $6.41 or 14% increase from last year’s average of $46.90. The centerpiece on most Thanksgiving tables – the turkey – costs more than last year, at $23.99 for a 16-pound bird. That’s roughly $1.50 per pound, up 24% from last year.”

Farm Bureau used ‘volunteer shoppers’ to check the prices from Oct. 26 to Nov. 8, about two weeks before most grocery store chains started lowering the price of whole frozen turkeys.

“Several factors contributed to the increase in average cost of this year’s Thanksgiving dinner,” AFBF Senior Economist Veronica Nigh explained. “These include dramatic disruptions to the U.S. economy and supply chains over the last 20 months; inflationary pressure throughout the economy; difficulty in predicting demand during the COVID-19 pandemic and high global demand for food, particularly meat… The trend of consumers cooking and eating at home more often due to the pandemic led to increased supermarket demand and higher retail food prices in 2020 and 2021, compared to pre-pandemic prices in 2019.”

According to the Department of Labor, U.S. inflation has hit its highest annual rate in more than 30 years in October. The consumer price index, a key inflation metric, increased 6.2% from October 2020 to October 2021, the fastest annual rate since 1990. In the month of October alone, inflation surged 0.9% compared to the 0.6% economists expected, according to CNBC.

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