This is, of course, an impossible task, but it does have
huge political implications.
Let's look at the recent numbers first:
Retail Sales were running pretty strong until today's disasterous report.
Industrial Production and Capacity Utilization have flattened out over the last two months.
The heavily understated CPI numbers are now firmly above 3%.
Durable Goods orders fell off a cliff in July.
Personal Savings have gone negative for the first time since the 1930's.
Construction spending has been flat for four straight months.
Of course all these numbers were pre-Katrina.
Katrina is going to eliminate
400,000 jobs. It's also going to damage an already huge federal budget deficit with
at least $150 Billion in new federal spending for reconstruction.
And then there are energy prices. Even before Katrina natural gas prices
had nearly doubled. In some areas, heating bills are expected to rise
40% this winter. And, of course, the
price of gas is north of $3 a gallon right now.
Let's not forget the real estate bubble, the leading driver of our current economy, is
starting to slow down.
So where does that leave us?
We have an economy that is starting to slow, and a consumption-driven economy about to have the consumer paying more to tread water.
And those are the ones that will be working. On top of the Katrina-linked unemployment, GM and Ford are having serious financial problems that will bring on massive layoffs at the very least. Add in bankrupcy at Delta and Northwest airlines, with American and United already bankrupt, and you have a lot of Joe Sixpack's not spending money anytime soon.
Even all of this still doesn't guarantee a recession. And if it does, that still doesn't mean the economy can't limp along for months before going negative. And even if we do go into a recession, the government might play with the numbers enough that no recession is actually declared.
My guess is that we are probably already in the leading edge of a recession. I don't think the government will play with the current numbers to mask a recession because they can use the hurricane to blame it on. Just like the Bush Administration and financial media blamed almost everything on 9/11 eventhough the 2001 recession started many months earlier.
The problem is how are we going to get out of the recession? The Fed hasn't had much of a chance to raise interest rates, and since inflation is starting to climb, it will be hard-pressed to start cutting rates soon. The country has no savings to draw on or manufactured goods to export. Our homes are already over-inflated in value. Our stocks and bonds are nearly as over-inflated in value. The federal government has nearly spent itself bankrupt already. High levels of debt infects every part of our society.
So the question probably isn't "when does the recession start?". The real question is "what miracle can make it end anytime soon?"