One of the questions I seem to be getting all the time is “When is this recession going to end?”

To answer that, I turned to Lakshman Achuthan of the Economic Cycle Research Institute (ECRI). Their leading vs coincident chart provides insight into that question.

The cyclical turns in the leading occur before the coincident — they seem to diverge now and then, and that can be telling.

The current story they tell is clearly one of a quickly worsening recession with no end in sight:
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ECRI Leading and Coincident Indicators


Source: Economic Cycle Research Institute

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Short answer: No time soon. . .

Category: Economy, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

22 Responses to “ECRI Leading Indicators Fall to Lowest Level Ever”

  1. NEWSFLASH! When all roads lead to the bankruptcy of the U.S. Treasury, this “recession” will never end…

  2. Mike M says:

    I do wonder how much of that has been related to the crashing stock market.

  3. greenie says:

    With all the ramped up government spending and “guarantees” to US companies the recession will come to an earlier end. Unfortunately the consumer and businesses all have alligator arms right now and want someone else to start spending…the one upside of this economy is that saving rates may increase..(MAYBE)…

  4. scorpio says:

    the Bush/Obama administration has done nothing to date for the real economy, it’s plunging. people will be made confused and hopeful by the gigantic sums being thrown around by The Git and Paulson but it’s really just disappearing down the black hole of Wall St leverage. this is malinvestment on the grandest scale of all time

  5. R. Timm says:

    There is a lot of talk about how the US must be going bankrupt, but the Ten Year is at 3% this AM. Not a lot of risk premium built into 3%! At three percent the government would be fools to not spend like drunken sailors on a stimulus package or buy up billions in relatively safe home loans at 5.5% or 6%.

  6. BKM says:

    The Recession will end when the Depression begins. It is just around the corner.

  7. rww says:

    Yes, to all the above. Underlying everything is a decade of falling wages and there is no plan in sight to reverse that trend.

  8. jason says:

    Each piece of bad news today is absorb with a market downturn but then quickly reverses course. The bulls got their blinders on and are tugging with all their might. The bears seems to be pondering a turkey dinner…I think I will join them.

  9. albnyc says:

    In September and October we were told by _______ (fill in “expert” or “authority” of your choice) that the world was about to end, economically. And the public reacted appropriately…they shut down. Therefore the data have fallen off a cliff. Why do so many seem so surprised at this? I keep looking at the data coming out and saying, “No Sh-t, Sherlock.”

    Given all the “smart money” that has been consistently wrong for so long, it’s been difficult to control my contrarian instincts.

  10. Winston Munn says:

    I would hate to need capital and be unable to access a government sponsored source of funds – looks to me that due to the huge crowds, private enterprise cannot even get close to the front door of the drunken Treasury giveaway party.

    Growth, where is thy sling?

  11. babycondor says:

    “The current story they tell is clearly one of a quickly worsening recession with no end in sight.”

    I see a different picture: sharp spikes upward at each of the major bottoms. It could happen in 6 months or less from this one.

  12. TrickStar says:

    I’ll bet my entire 2008 stock market returns that no one except Lakshman has a clue as to how to read that chart. :) What’s funny is that before I looked at it, I really didn’t have a clue as to how long or how deep the recession will be. Fortunately, the chart confirms it, which makes me feel better.

  13. DL says:

    TrickStar @ 12:47

    “I’ll bet my entire 2008 stock market returns that …”

    I’m assuming that they’re in the green.

    (I, on the other hand, will happily bet my entire 2008 returns that pigs will fly tomorrow).

  14. TrickStar says:

    DL – LOL. They’re black. Why? They do have parentheses around them (for some reason). ;)

  15. Chuck Ponzi says:

    Wow,

    I agree with Trickstar. Very few above have bothered to read what this might mean.

    Unfortunately for most, running with the herd means they don’t see what’s going on outside. That includes herds running north or south. Or East or West for that matter.

    Chuck Ponzi

  16. Jurgen says:

    BR: “The current story they tell is clearly one of a quickly worsening recession with no end in sight”

    Barry,

    Lakshman’s interpretation of the index — “Weekly Leading Index has fallen to another historical low, indicating that there is no economic recovery in sight” — is wrong, possibly biased and misleading (he is heavily positioned on the short side and lacks objectivity. In addition, he has been in a house of pain since last Friday).

    Here is how Geoffrey Moore, the inventor of this index, would interpret it…

    The index has fallen to another historical low. It was pushed down by another historical commodity and stock prices drop (commodity and stock prices are part of the index) that resulted from another wave of hedge fund margin calls, retail panic and redemptions, and forced hedge fund liquidations (note, the reasons for the drop were more technical than economic [terrible economic data has already been discounted and discounted and over discounted by the market]). In addition, the index was calculated using last week’s data (last week’s “leading” indicators); therefore, it does not reflect the most recent 15-20% jump up in commodity and stock prices. Next week, the index will be higher, and it is possible that it is a turning point that usually occurs at these levels – it could be the turning point and “the end is in sight”.

    P.S. The index is important but as Geoffrey Moore said, “interpreting it requires informed judgment”. It is obvious that Lakshman lacks such judgment. Take what he says with a large grain of salt.

  17. tidervan says:

    Barry,

    Would be interesting to see the S&P overlayed on the above chart…thx

  18. wildbluyonder says:

    STOP STOP PLEASEEE, YOU GUYS!!! I’m laughing so hard I almost fell out of my wheelchair, really thank you all for your wit. It is a well deserved tonic for me (1947). As I find myself facing a bright screen during “this one more occasion of my observing this particular day in this life-cycle-season”. It is generally noted for being an opportunity to remember our many blessings. Laughter has always been a blessing to me, so I thank whomever is responsible — and that includes all of you. Goodnight

  19. aerodynamichaircut says:

    Good luck finding someone to help you get back on your wheelchair. LOL!

    The stock markets behavior constantly evolves. Something tells me that this time around, those searching the history books who make postdictive data decisions on how to time the bottom will get worked, even if they get in close to the near term bottom. It will likely be some unforeseen event that sends the indexes on a new leg down, leaving many with no opportunity to get out near the last prior bottom. Moral hazard has stacked up over the years to the point where 40% down in the indexes is not nearly commensurate with what the piper demands. Some inevitability seems to be hiding around the corner. Even the American public senses this, as they are generally opposed to these bailouts. “Having to do something” about the crisis does not necessitate throwing insane amounts of money at each problem. The solution to this problem is not that obvious.

  20. taninvest says:

    leading indicator “predicted” recession in 2007 & also in 1987?
    there was a shallow drop in 1982, but a fairly long & deep recession–especially in the West (resource dependant)
    as pointed out earlier, how much of index fall due to stock market decline?
    is stock market over-discounting deep recession?

  21. TrickStar says:

    Jurgen – Thanks. That was very helpful.

  22. mikaeel says:

    It used to be cheaper to buy than to rent. That went for cars as well as homes. In NYC, even as prices drop you still can’t make a profit buying a one family home and renting it out. No one will pay a rent that’ll cover the mortgage. That is unless you turn your garage or basement into an illegal apartment and rent it out as a second apartment.
    When being the landlord of a one family house is profitable again maybe the economy will right itself.

    The American dream used to be, own a house and live comfortably. People rushed to own homes but forgot about the comfortable living part. The establishment oversold the idea of home ownership. People were willing to put common sense aside and jump all in, the truth be damned. Up until about six months or so I had relatives and co-workers who thought it was impossible for home price to drop. People were buying homes not as places to live, but as short term investment vehicles. The market was over bought. I have a couple of co-workers in the 60′s who can’t retire because they can’t sell homes that are now under water because of home equity loans.

    There’s a story of stock broker who was on an elevator just before the crash of ’29. He over heard the elevator operator talking about a stock he had purchased. This broker realized it was time to get out of the market. When elevator operators are buying in, he felt, the market was over bought.

    I don’t know about indicators, but when a bunch of people want to sell and nobody’s buying, prices go down.
    For the year – wheat prices, down; oil prices, down; housing prices, down; stock market, down. I think this is going to last a while.