Friday, April 8, 2016

Trump predicts massive recession

CNN was on TV in the background as I wrote the article that follows -- suddenly I heard Trump had predicted a "massive recession".

I can't recall any other Presidential candidate in my lifetime ever predicting a recession.

In fact, hardly anyone predicts a recession -- we're usually 3 to 6 months into a recession before most economists realize we're in one!

Sure, some perma-bears always expect a recession, so they might seem "right" in about two years of every decade ... like a stopped clock is right twice a day!

The last recession started December 2007, so it's likely another recession will start before December 2017 -- more than a full decade between two recessions is rare.

The US economy was weak in 4Q 2015.

The Atlanta Fed is now predicting only a 0.1% annual growth rate for 1Q 2016.

Their "predictions" just after the quarter ends have been accurate in the past.

The official first "advance" 1Q 2016 GDP estimate will be April 28.

Right now I believe there's a 50% probability of a recession starting in 2016.

But before I call the start of a recession, I need to see weekly data showing a significant bad news trend.

One example would be weekly new claims for unemployment insurance in a sharply rising trend, and up 10% to 15% from the trough.

We don't have that yet.  

A CNN news reader with the odd name "Poppy Harlow" dismissed Trump's claim because 'he's not an economist'.

I burst out laughing -- as a group, economists have NEVER predicted a recession, much less a "massive recession". 

Most economists are perpetually optimistic for two reasons:
(1) Most are employed by financial firms that make more money when their customers are bullish and greedy, not bearish and fearful of a recession, and 

(2) In a typical decade the economy is in a recession no more than two years out of ten -- so being bullish all the time makes an economist right at least 80% of the time … without thinking