Once again ECRI’s Lakshman Achuthan discusses his negative forecast with Bloomberg’s Tom Keene. Now he says we are already in recession. This is a very interesting observation because he says it’s more than just output, but things like unemployment, spending, and income. While the common definition of a recession is two negative quarters of GDP, he says we need to look beyond that. Perhaps he is just hedging his forecast because we are technically not in an NBER recession right now. But I agree with him. While I had called for recession/stagnation a year ago, I have been careful to hedge my bets by saying we would at least face stagnation. And so far I have been correct in that call.
The thing about ECRI that I don’t like is their black box approach. They have a proprietary methodology that they don’t reveal. It’s not that big of a secret because it was originally based on economist Geoffrey Moore’s work. But of course it is how it is used that is the trick. As I was listening to Achuthan it struck me that his entire approach is probably econometric (empirical). His data set points him to a conclusion. But when he tried to explain the possibility of price inflation he waffled and gave a wait and see response. Which puts him squarely in the neo-Neo school of economics (neo-Keynesian/neo-Classical/neo-Monetarist), the whatever-is-current brand of economic thinking. His answers are like saying that recessions cause recessions. It is not as if data isn’t important: it is. But without a background is sound theory (Austrian) reading data tea leaves is tricky business.
Whatever. His forecasts coincide with mine so I like his conclusions. It’s an interesting, but friendly, interview.