Lakshman Achuthan of the Economic Cycle Research Institute (ECRI) got a lot of praise and attention for predicting recent recessions, which were subsequently confirmed by the NBER.
However, it’s Achuthan’s latest recession call that’s made him the target of immense criticism. Back in 2011 he said that the U.S. was doomed for a recession. And in late 2012, he said that the recession started in mid-2012.
He had been reiterating that mid-2012 call, noting that the economic data collection agencies have a long track record of having to make big revisions to past data.
Achuthan provided an update today. From an email to Business Insider:
We’re not budging from our call. Looking back, the epicentre of the recession was the half-year spanning Q4 2012 and Q1 2013, which saw just 0.6% annual GDP growth, mostly from a freak jump in agricultural inventories (w/out which it would be 1⁄4 per cent).
For the early quarters of last few recessions there were massive gyrations of two-to-four percentage points in GDP prints, generally downward, due to very belated revisions. So GDP for Q4 and Q1 could easily end up negative after revisions…
That’s likely not going to quiet Achuthan’s critics as it appears he is fudging his timeline. To be fair, saying the center of the recession was a year ago doesn’t necessarily conflict with his call that it began in mid-2012.
However it does conflict with the NBER, who hasn’t said there has been a recession, and the BEA, who hasn’t reported two consecutive quarters of negative GDP growth.
Moving past that old recession call, Achuthan also updated us on his take on the current status on the economy.
And he’s not optimistic.
“Today there’s a pervasive view that U.S. growth is about to take off and reach escape velocity, which is why so many want to just ignore the December jobs data, saying it’ll be revised away,” he said. “Our analysis strongly suggests the current consensus that the economy stands on verge of taking off is wrong.”
To the right, you’ll see the dramatic chart Achuthan has on the ECRI website. Here’s his commentary:
OK, let’s pretend December didn’t happen, and focus on the trends. In the preceding 12 months we created 194K payroll jobs per month, but only 101K per month according to the household survey. Which is telling us the truth? Remember, the 12-month average of job growth has been revised down substantially over the past decade for payroll jobs, but hardly at all for the household survey, only 1/25th as much (see attached chart).
And something that nobody seems to have noticed is that the household survey, adjusted to the payroll concept, actually shows a decline in employment since the summer. Bottom line: even ignoring the December jobs data the trends are getting noticeably worse, especially for data not subject to major revision.
So, throw whatever bullish signs you want to Achuthan. He’s just not buying it.
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