Perhaps the most widely-watched among economic analysts when it comes to recession is the Economic Cycle Research Institute, or ECRI. The group has correctly called the past two U.S. recessions, and most tend to have the view that the U.S. economy won't be in a recession until the ECRI says so. Well, the ECRI now says so (hat tip, Calculated Risk). In a report not released widely to the press, but reported on by a few outlets, the economic think-tank on Thursday reversed its prior course and said the U.S. in unquestionably in the midst of a recession. The group now joins most major economic sources that made such a call a few weeks back. Reuters covers the ECRI's own index:
The Economic Cycle Research Institute, which correctly predicted the 2001 recession at a time when many on Wall Street still maintained a rosy outlook, said their numbers indicate the economic contraction is already under way. Extending its weakening trend, the firm's Weekly Leading Index fell to 130.8 in the week of March 14 from 132.1 in the prior week, revised down from 132.2. "It is exhibiting a pronounced, pervasive and persistent decline that is unambiguously recessionary," said Lakshman Achuthan, managing director at ECRI.
Chris Isidore at CNNMoney gets into the details with Lakshman Achuthan, a managing director at the ECRI, who had some harsh word for policymakers and members of the Administration:
Lakshman Achuthan, the managing director of the Economic Cycle Research Institute, said the economy has now fallen into what he calls "a recession of choice." He argues that the economic stimulus package passed by Congress this year is too late to help many consumers and businesses and that the Federal Reserve was too timid when it started trimming interest rates last fall ... He said low business inventories at the end of last year gave policymakers a chance to avoid the recession, because any spur to spending by businesses or consumers would have resulted in a quick pick-up in production. "There was an opportunity that was wasted by policymakers because they didn't understand those dynamics," he said. "That is one aspect of how the policymakers have goofed and why this recession is a choice, not something that happened by bad luck and chance."
There's much more to Laks' argument, including what he called "horrible execution" of an economic stimulus package, lamenting the fact that most won't see checks until May at the earliest. Personally, I don't see how a $600 check is supposed to offset a high rate of inflation and mortgage payment resets that would eat up a single "stimulus payment" in just one month for the most troubled mortgage borrowers. Perhaps it is more accurate to say that this is a recession that was set into motion years ago, when subprime lending first took off, and trying to claim now that it could have been prevented by acting one quarter earlier demonstrates the continued and inexplicable discounting most economists give to the idea that housing could, in fact, drive our economy into a recession.