Are we close to a recession? (update)
Last week the 2nd quarter numbers for labor share of national income came out. Labor share ticked up a bit from the previous quarter, but pretty much exactly the same.
There is a graph I use to detect if a recession is imminent. The graph gets updated as the labor share number is revised. Here is the graph produced from FRED.
When the blue line goes below the yellow line, a recession was imminent 7 out of 8 times since 1967. As you can see, a recession was not imminent as of the 2nd quarter 2013.
I say yes. Shrinking deficits, higher taxes (fed and local), slow private borrowing, and declining government spending growth (fed & local) will drag us into recession in 2014.
Nope, not even close. Investment driven boom, that reminds me of the 90’s a bit(without the Y2K refit).
Shrinking deficit is a sign of this recovery. Higher taxes? Not much. slow private borrowing? Accelerating.
Shrinking deficit always precedes a recession: See The Recession Clock: http://mythfighter.com/2013/08/11/the-recession-clock/
and
federal deficit spending is stimulative:
John, investment in what? Where is the demand? Private borrowing is horrible overall, and the housing market is still a huge drag:
http://www.calculatedriskblog.com/2013/08/ny-fed-household-debt-declined-in-q2-as.html
We have a weak recovery. I still feel the recovery didn’t get sound footing until after the 2012 Presidential election was over. That said, we have something very weird going on. Profit growth has mainly been coming at the expense of labor and not in terms of increased sales or growth. Some of this is due to the worldwide slowdown. If people don’t get raises, if people on short weeks don’t get their hours raised if money doesn’t flow through the economy we will continue to have a Japan like situation for many years. Things are starting to change a little now, but I don’t think the fed should get off the gas til Spring. We have to see this through, its too early. I work as a CPA and as reports out there state the middle class seem to continue to fall behind as of now. Had we let the banks fail and allowed things to crash, it would have been awful, but the way back would have been quicker and more solid, prices would be lower, new businesses created instead of old scum still running the show.
it looks like we are close