This Recession May Be Mild. The Second One Will Be Worse.

[mahatmakanejeeves]

Barrons.com

This Recession May Be Mild. The Second One Will Be Worse.

Robert Heller
Tue, July 12, 2022, 3:30 AM

The U.S. is likely entering the first dip of a double-dip recession, writes former Federal Reserve Board Governor Robert Heller.

ECONOMY & POLICY

This Recession May Be Mild. The Second One Will Be Worse.

COMMENTARY
By Robert Heller
July 12, 2022 3:30 am ET

About the author: Robert Heller is a Former Member of the Board of Governors of the Federal Reserve System.

The U.S. has now likely entered a recession, and the chances are good that this will be the first dip of a double-dip downturn—thereby repeating the experience of the early 1980s.

The most recent data published by the Bureau of Economic Analysis show that real gross domestic product decreased at an annual rate of 1.6% in the first quarter of this year. And the GDPNow data published by the Atlanta Fed peg the growth rate for the second quarter at a negative 1.9%. Many economists regard two quarters of negative growth as a recession, but it is up to the National Bureau of Economic Research to make the official call—which usually takes them quite a long time to accomplish.

A number of factors have contributed to the economic slowdown. Among them are the cessation of federal stimulus payments to individuals and corporations, as well as a significant slowdown in the construction and goods-producing industries.

However, Federal Reserve policy is still highly stimulative. The official Fed Funds Rate is now pegged at 1.50-1.75%, but the consumer-price index has risen by 8.6% over the last year, yielding a real or inflation-adjusted fed funds rate of approximately minus 7%. This is a highly stimulative fed funds rate by any measure. Similarly, longer-dated treasury bonds offer only negative rates of return in the neighborhood of minus 5%. If the policy of the Federal Reserve were truly restrictive, one would expect the fed funds rate and Treasury yield curve to be above the inflation rate.

{snip}

[FBaggins]

1. The NBER clarification isn't going to help much politically

If the Atlanta fed's "GDPNow" estimate turns out to be the reported GDP figure for Q2, it's going to be called a recession. "It isn't really a recession until NBER says that it is and that won't happen until well after the election" isn't likely to be a very effective defense.

[progree]

2. GDPNow: It's been minus 1.2% since July 8 (not minus 1.9%)

https://www.atlantafed.org/cqer/research/gdpnow

I think this clown reporter is just reading something he scraped off the Intertubes. Any idiot can check in 3 seconds, just type GDPNow in Google and it pops right up at the top.

I know that's thin beer, but one should read the the disclaimer, e.g.

GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available economic data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model.

Also the latest consensus of the Blue Chip survey of economists is PLUS 3.0%, although that was about June 26 according to the graph.

I can't believe the economy fell apart between June 26 and July 8, but because the July 8 jobs report failed to show 2 million jobs created in June, it might have. (sarc)

And now we have the Breakfast Taco-Gate scandal consuming the presidency (sarc)