There now seems to be enough evidence mounting. This recessionary cycle will likely be over by July.
You first heard that level-headed prediction from Mark Hirschey, Professor of Business at the University of Kansas back in November. He called all the dire commentary back then "overblown." Further he confidently stated, "If you look at history as a guide here, it would suggest that sometime between now and the Fourth of July in 2009, you’d expect business to once again turn up."
The evidence is now building that Hirschey may be right on the mark:
1. Macro uncertainty is subsiding quickly. In their excellent paper on economic uncertainty, Economists Bloom and Floetotto of Stanford University, propose uncertainty shocks as one of the primary impulses that drives business cycles. It is indeed these shocks in uncertainty that cause business to delay production cycles or trim staffing levels. But as uncertainty subsides, businesses re-deploy.
As you know many pundits are still warning that a dire recession is in the offing. Bloom and Floetotto would have been among them three months ago, but now, "based on the analysis of 16 previous economic shocks... and using the latest data on uncertainty measures, our model predicts that the worst has been avoided."
Further, they now claim that according to their model economic uncertainty is dropping so rapidly that "we believe growth will resume by mid-2009."
2. Credit is Flowing Again. In his excellent post on credit markets, Prieur du Plessis concludes that "the credit market tide seems to be turning." His in-depth look at worldwide credit indicators points to significant warming conditions since the "big chill" last October.
3. Global Commerce is On the Rise. The Baltic shipping indices are coming to life again. According , the Dry index "has just about doubled from its early December low." Grannis further explains, that this closely watched shipping index is a high level indicator of trends and associated strengths on a global scale. Dr Mark Perry shares details about the index here.
4. The Consumer is Ready for Spring. You've also recently read that consumer confidence is now "surprisingly" up. The US Consumer when re-awakened will discover that all the commentary in October and November was overblown. Their spending this spring, will re-ignite any remnants of winter slowness in the retail segments.
5. Firms are Hiring. Although many companies announced layoffs as part of their year-end earnings announcements, these actions were largely to placate their stockholders. A vast number of them are now quickly reversing course and hiring aggressively. Indeed, several high profile private firms who don't have to bow to short sighted stockholders, have taken the opportunity to declare "No Layoffs -- Ever!"
Clearly the evidence for the end of this recession is mounting. As we actually approach the turn-around point, the increase in good news will be followed by the inevitable up-turn. Probably between now and independence day.
Hirschey will be proud and continue his calm analysis of economic cycles from his classroom. And Warren Buffett, will be raking it in yet again.
When all you read is gloom, turn here for a much different perspective.