When all you read is gloom, turn here for a much different perspective.

Wednesday, February 4, 2009

Evidence Points to Recession's End by July

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.


  1. I read you every day and it's been keeping me sane and rational. Unlike mainstream media. Thanks again!

  2. Thanks Madsen,

    Glad to hear the writing is keeping you sane...

    Some days it has the same effect on me.


  3. Keep it coming!!! We need to counter the mainstream media gloom and doom outlook!!! The MSM is only out to make America fall so the Dems. can take control of everyone and remove our freedom!

  4. I consider myself a fiscal conservative, but I think both political parties are guilty of hyperbole to sell their policies. Remember, W argued that if Congress didn't pass TARP, "this sucker was going down (ie- GD II)."
    Also, don't forget the "mushroom cloud" that was going to explode over Manhattan if we didn't invade Iraq. Now the Dems are doing the same thing with the stimulus bill and other policies to nationalize the banks. We need this website to give people a more balanced view.

  5. Anonymous,

    The charter of this website is to provide "good news". I've stated here multiple times, that it is not my intention to present the "balanced view" here. The intention is to point out the good news because mainstream media is (by their own admission, skewed to the negative.) Their are other outlets that may claim to have a balanced view and that's great. That's just not the charter of this website...

    Thanks for reading.


  6. Frankly, I believe that it is way past time for some positive talk. I'm tired of doom and gloom. If the American public didn't have our noses rubbed constantly in the stink of negatisim we may actually loosen up and spend more. many do still have their jobs. (My husband lost his but we WILL find something else). We have got to start focusing on the positive. I, for one, do not want my freedoms taken away because of mass panic.

  7. I've known for a certainty since a hurricane hit land about 3 years ago, while we were living in Cabo San Lucas, MX, that the media blows everything out of proportion.My mother and I were comfortably sitting in our livingroom there, while watching Sat. TV the "talking heads" warning tourists and travlers that "Cabo San Lucas is taking a "pounding".
    We were, by the way, right at "Land's End" in the heart of this "monsterous hurricane".
    There we sat, watching TV, lights, electricity and listening to a little wind and rain outside.Lost power for 20 minutes.THIS, in Mexico.So much for the truth in journalism.
    So it goes with the dire economic forecasts of the last few months. Unfortunately, the more people buy into this kind of reporting, the worse the fears, the less the spending, it becomes a self-fullfilling phrophecy.
    Now, we are living comfortably in Rosarito Mexico...where "much violence and murder is occuring, and the US government warns tourists to say away. We have yet to even hear a single gunshot.We travel about, eat out, etc. and though the drug cartels are, admittedly, at war with each other...we, as Americans, univolved with drug trade or tafficking, go about the daily business of living in "paradise" and are so sick and tired of news that so skews reality.
    In short, America, SPEND! Invest. Live. If you don't, the "evil corperations" and/or terrorists will have won.You don't have to wear rose-colored glasses, but you also don't have to emulate Chicken Little.Things could be better, but the reality is that the sky is NOT "falling" either.

  8. Right now I am crying. I made the mistake of reading the news today oh boy. To quote John Lennon, rest his soul. I am just depressed when I read stuff. I have a job etc, but it is all so awful. And then there is your column... I broke my promise to myself not to read depressing news. And I will try not to read it anymore. Thank you for being positive


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