Despite the White House’s assurances of a steady economy, many conservative Americans have continued to worry about a coming downturn. A recent CNN story by two renowned economists from ECRI warning that “a recession really is coming,” confirmed these fears. Those who claimed that we are on the brink of economic disaster and should be taken seriously find this to be a potent kind of vindication.
Lakshman Achuthan and Anirvan Banerji state, “We disagree,” to the assertion made by certain economists that the nation won’t experience a recession because of the robustness of the labor market and household balance sheets.
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“Despite the relatively robust job growth we’ve been seeing, the Economic Cycle Research Institute (ECRI), which we co-founded, has been predicting recession since last spring, and it remains our expectation that the US economy will enter a recession this year,” they ominously write.
In an attempt to curb inflation and cut down spending, the pair observes that the Federal Reserve has been hiking interest rates since March 2022, “and very sharply since June.”
“The problem is that, by the time the Fed began hiking rates, the economy was already slowing, making recession more likely,” they explain.
The manufacturing industry has suffered a terrible hit as a result of falling factory orders, rising mortgage rates, and a decline in house starts and construction permits. This is bad news for the home building sector since expenditure will inevitably fall.
“Meanwhile, the purchasing managers’ index for manufacturing, which measures the month-over-month change in manufacturing activity, fell below 50 in the last two months, implying that a manufacturing contraction is underway,” Achuthan and Banerji state. “Moreover, its service sector equivalent has also slipped under the 50 mark, suggesting that services activity has started to decline.”
For months, conservative pundit and Radio Hall of Famer Glenn Beck has constantly issued dire warnings concerning a variety of topics.
In September 2022, he tweeted, “The Fed just raised rates by 0.75 points for the THIRD time this year. Americans already know we’re in a recession. They feel it at the gas pumps and grocery stores.”
“The system is RIGGED,” he declared.
The world economy was placed on high alert in October 2022 after UN experts warned of an impending recession.
“The UN called on the central banks of the US and Europe ‘to revert course and avoid the temptation to try to down prices by relying on even higher interest rates,’” BizPac Review reported at the time. “Further they argue. ‘Lower inflation targets are not worth the pain of continuing hikes in interest rates.’”
Nevertheless, Vice President Biden takes great pride in his economic “achievements.”
“When I ran for president, the economy was flat on its back. But we got to work, putting in place a new strategy that would grow the economy from the bottom up and middle out,” he tweeted last week. “Two years in, more Americans are working than ever before. Our plan is delivering.”
Fact-checkers rushed to the tweet to correct it as soon as Elon Musk took control of Twitter.
“More total Americans are working than ever before,” they wrote. “However, the labor participation rate is lower than a previous record.”
“Recessions always entail noticeable declines in both GDP and jobs, but such pullbacks are not necessarily obvious at the recession’s outset,” say Achuthan and Banerji. “While GDP and jobs do move in step with the economy, by the time they are released, they only tell us where the economy had been in the recent past.”
“Employment, in particular, can hold up longer than expected in a recessionary scenario,” they add. “That was true in the inflationary era around the 1970s. Most notably, employment didn’t peak until eight months after the start of the severe 1973-1975 recession.”
According to economists
The “money illusion,” where company owners often see their income in nominal dollar terms instead of appreciating its true worth, adjusted for inflation, may be the cause of the unwillingness to let staff go both then and in the current economy. In other words, even while their income is increasing in monetary terms, less labor and raw materials may be purchased with the same amount of money because of inflation.
Any firm may have difficulties during a recession since inflation-adjusted sales often decline as a result of lower consumer spending and higher pricing. As a result, firms are forced to make difficult choices, which sometimes include layoffs, as earnings start to be squeezed by rising labor and material expenses.
Goldman Sachs announced significant labor cutbacks of more than 3,000 workers last week. BlackRock, the largest asset management in the world, has said that it will reduce its present workforce of 20K employees by 500 people. These dramatic actions unmistakably show the global economic situation, which is difficult.
“We saw a mirror image of today’s economy in the spring and summer of 2008, when the Great Recession, which started in December of 2007, was already underway,” Achuthan and Banerji write. “Then, many — including then-President George W. Bush — were not concerned about a recession because GDP hadn’t declined yet, even though job losses had begun.”
The reaffirmation of economists’ predictions for the present economic environment offers a much-needed feeling of stability and security.
“Our recession forecast hasn’t wavered,” they state. “We should all be prepared.”
