Economists Up the Odds of a Recession -WSJ

Economists that participated in a WSJ.com survey felt that there was on average a 36% chance that the US will fall into recession in the next 12 months. There were 52 economists that participated in the survey, and it was taken the days following the disappointing jobs report on September 7th. Three-fourths of the economists thought there was a greater than 30% chance of recession, and the 36% average was up from 28% a month ago. The main sources of risks were the credit crisis and the housing slump. About 60% of the forecasters thought the housing slump was half over, while the rest still thought it was in its early stages. The economists that felt more positive about the US economy believed that strong manufacturing expansion and a solid global economy creating more US export growth would support the US. About 85% of the forecasters felt the existing conditions necessitated a rate cut. Wells Fargo economist Scott Anderson said, "The drop in trend employment growth is stark and deserves a response from the Fed if only for insurance reasons." Economists forecast a couple rate cuts in the next year. and predict the fed funds rate will drop to 4.5% by mid 2008. Finally, not one economist predicted that oil would finish this year above $80/barrel. The average price estimated was $68.63/barel.

Sources: Wall Street Journal
Commentary: Forecasts Show Crude Prices Falling Steadily • Oil Trades All-Time High • Bernanke Mum on Possible Rate Cut

Seeking Alpha's news briefs are combined into a pre-market summary called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.

Comments

[Marty]

The economists? You mean the same guys that predicted the 110,000 new jobs that turned out to be negative 4,000 jobs? The same group that refuse to analyze the true rate of inflation in what people really have to pay for things instead of some manipulated statistic? The ones that think the labor market has been booming with high quality jobs while we see kids graduating with 4 year degrees moving home to try to deal with crushing student loans running a 12% interest rate. The days of funny math and silly predictions need to be over people need a reality check out there. When your fuel, heating oil , electricity, real estate taxes, medical insurance costs etc grow at double digit rates and housing doubles in price in 8 years in many areas you do not have 3% inflation. Furthermore in the late 70s to early 80s, during an inflationary period the cost of living adjustments totalled 70%. By the end of the 8 yr inflationary period those on fixed incomes and most in jobs were making 70% more in pay to pay back debts. During this cycle costs have also accelerated dramatically in terms of money outlays for the same goods. The cost of living adjustments over the last 8 years have been 25%. This is why even retirees with no mortgage at all let alone a sub prime one are having a hard time. This is NOT a sub-prime problem. This is a lack of good jobs, acceleration of living expenses problem that is first seen in Sub prime as that is the sector with the least cushion. We are seeing retirees reverse mortgage their home (taking assets from the next generation in order to survive and this is muting how bad things are. When the savings rate turns negative for the first time since the Great Depression that is telling you something. It is saying people cannot afford to save after paying their bills. This happened BEFORE the subprime crisis and all the "Economists" ignored it. Id love to talk to anyone about these issues as I get nowhere it seems .

Martin A. Adamo CPA [e-mail]

2007 Sep 13 09:52 AM

[NoFate]

Economists are notoriously bad at predicting recessions. Here is a pretty good set of indicators:

bigpicture.typepad.com...

There are other good indications:
- New home sales (if they go below 600 million, not there yet though)
- Part time employment craters (this is occurring).
- Inverted yield curve (it's inverted)
- And others...

Anyway, Economists can't even figure out if we were in a recession sometimes until 2 years later. They are the last group of people I would ask.

2007 Sep 16 01:05 AM