April 30th, 2009
10:59 PM ET

Forecaster says recession is almost over

Program Note: Tune in tonight for a full report from Ali Velshi on AC360° at 10 p.m. ET.

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Ali Velshi | Bio
CNN Chief Business Correspondent

One of America’s most reliable economic forecasters says the current recession – the longest in half a century – will end this year, possibly as early as this summer.

Lakshman Achuthan, Managing Director at the Economic Cycle Research Institute (ECRI), was one of the first to declare that the US was in a recession. Now he’s one of the first to say its ending. ECRI, he says, is the research group in the world that studies business cycle recessions and recoveries for a living, and has a near-perfect record of predicting. They do it by crunching various pieces of data and creating “leading indicators” which show where the economy is headed

The indicator that looks the furthest into the future actually started showing signs of future growth as early as last November, as the worst of the credit crisis started to ease. Another indicator, with a shorter lead-time into the future, started pointing toward growth in early December. Both indicators have showed steady growth since then and that, says Achuthan, is enough data for him to say this recession is ending. That’s because, over the last 75 years, when those indicators turn up, the recession ends within four months. No exceptions, says Achuthan.

Achuthan points out that these same indicators predicted the current recession, by turning downward BEFORE the recession began. Specifically, Achuthan notes, his leading indicators turned downward in Early June, 2007; the current recession “officially” began in December of that year. Because of that, Achuthan was able to announce that the US was in recession some NINE MONTHS before the National Bureau of Economic Research, which is the official arbiter of recessions, did.

But don’t buy the party supplies just yet. The end of a recession simply means that things will start becoming “less negative.” A top adviser to President Obama says the economy will again shrink in the 2nd quarter of this year – that’s the period we’re in now. But Achuthan declaration doesn’t really counter that – he doesn’t think recovery will start until the 3rd quarter – sometime after June.

But how do you have a recovery if job losses continue? The Labor Department says 6,300,000 people are now drawing unemployment benefits – that’s a record. And a number greater than that are unemployed but NOT collecting benefits, because their benefits have run out.

Achuthan worries that during a recession, we all become more productive, by working with less (we fill in when our colleagues are laid-off, for instance), and so you don’t need to hire all of those people back for the economy to recover. The danger of that is that many millions of people who have lost their jobs may not get them back in this economy – and that can create great disparity in society – “haves” who have more; “have nots” who have less.

Filed under: Ali Velshi • Economy • Finance
soundoff (14 Responses)
  1. Don

    Ali, I am really trying hard to be optimistic, but.....when I look at the facts, the mathematics, the global trends of thinking and the conflicts of those popular thoughts, it just does not add up. Economic models are all built on the ever expanding economy, not the shrinking one of the post baby boom era. The debt of trillions of dollars mathematically cannot be repaid, so who are we kidding? The sadness is that there is little wisdom anywhere in government that can really fix this with solid long term solutions. Even our best economic minds come up short by looking at the data of yesterday for forecasting tomorrow when the road we are on has never been traveled. I really do hope Mr. Achuthan is right. We will only have a short while to wait and see.

    May 1, 2009 at 2:06 pm |
  2. Louie

    Yes, its going to be over soon because the people of this country are so excited that Barack Obama was elected to be president that people are confident enough to spend money on vacations, going out to eat, etc.

    April 30, 2009 at 9:47 pm |
  3. theresa

    i think that is great for the economic coming out of recession. but bad for those who r laid off or fired. i hope that the labor department can find jobs for these people. so that they will be able to take care of their families financially. as i alway say." bills must get pay." let's keep homeless out and people employed.

    April 30, 2009 at 7:28 pm |
  4. Margaret

    He can say that the recession is over,he has a job and a paycheck coming in every week..Sometimes I think that you people don't live in the real world..The common man is struggling just to keep our heads above the rising water..My family is lucky,my husband still has his job,we have health insurance( which cost more each quarter)our home is paid for,but we still live paycheck to paycheck..

    April 30, 2009 at 7:07 pm |
  5. C. Mark

    I've saw the turn around in the Atlanta housing market occur 7 months ago. I hate to say it on this site, but if people would put down the newspaper and turn off the TV they would have more confidence.

    April 30, 2009 at 7:05 pm |
  6. Jarett L.

    LOL – ya, okay! In a way, I hope not – the further down we go, the more the world will understand that the current financial system is broken, and is in need of SERIOUS restructuring. I don't mind any car maker folding – fewer cars being built means less pollution in MY air. Fewer cars being built means fewer cars on the roads, meaning even less pollution for my lungs to suck up. So – go Chrysler, go!!! PLEASE!

    April 30, 2009 at 7:04 pm |
  7. Jill

    God I hope it is almost over. That is something to look forward to.

    April 30, 2009 at 6:58 pm |
  8. earle,florida

    If the recession is almost over,how are the "TARP" recipients going to pay back the Treasury which accounts for approx.$550bn (to date) in loaned-out money? The largest banks in the country will be lucky to have annualized profits of no more than $30bn accumulated from all participants. That's assuming there's no more shoe's to drop,and I think not! My calculations are looking out approx.15 years for a break-even point,never mind the elusive inflection-point we hear so much about. Just look at the GDP and the weak numbers. These numbers are here for awhile,so don't be fooled. If we ever want to get this wagon-train back on track,there's still alot of pain! Why? During the 1990's we had the S&L Crises,and in the 80's another banking crises. But,in 2000,we had the Enron,Worldcom,and Internet Bubble ,which the Fed' politely swept under the rug! Lastly,and so aggrievously alrmingly was the 2005/06 congress which was fully aware of the GSE's (Government Sponsered Enterprises) going belly-up (Fannie Mae,Freddie Mac,Student Loans,Agricultural Loans,etc.) ,and again it was talked-down as a non-event. So,my final thoughts are beware of this government,and what they say,please save those sheckles,..? The Fed'/FDIC ,Government Entities,Congress,etc. all glossed over their responsiblities like, "Ostrich's Running in the Wind"!

    April 30, 2009 at 6:49 pm |
  9. JC- Los Angeles

    The day America stops dispensing mulligans, sweeping mortgage fraud and corruption under the national carpet and starts to produce goods and services that the global economy needs, will be the day our recession/depression ends.

    With bankruptcies, bailouts, do-overs, mulligans, corruption and scant leadership running rampant, how on earth can anyone suggest the recession is almost over?

    Perhaps Mr. Laksham Achuthan should be tested for swine flu.

    April 30, 2009 at 6:41 pm |
  10. Jim Carroll internet free press.com

    If we created a Reserve-Retraining Work Force, unemployment would be history and so would recession. If every is drawing a pay check wheither in school or in the work force, we could easily manage any change or adjustments in the economy. I published my first book on The Philosophy of Mixturism 35 years ago. We don't have to stumble in the dark, but we do because the free press will not do its job by discussing all new ideas.

    April 30, 2009 at 6:36 pm |
  11. Isabel

    I hope so!

    I love economy despite not understanding much of it. I consider myself one curious who reads everything put in front about economy.

    Thus, this is the first post I read, so optimistic.
    I only can to say: I hope so!

    April 30, 2009 at 6:35 pm |
  12. Annie Kate

    I guess if you put 5 economists in a room and ask them the same question you will get 5 different answers – Newsweek had a story that I read last night that said the recession would linger into next year and then recovery would be slow with growth rate of 0.2% for the year and not gaining much on it even into the next year. Maybe they factored jobs in but it sounds like even if they didn't that the unemployed are still going to be desperately seeking jobs.

    April 30, 2009 at 6:31 pm |
  13. Jim Carroll internet free press.com

    Recession is a product of ignorance. Article 1, Section 8, of the
    Constitution has the answer for a balanced money supply. The
    Federal Reserve is inadequate for managing the money supply.
    Tinkering with interest rates is a joke that has never worked. The Federal Reserve was created in 1913. It didn't work during the great depression. Swine flu could kill half of the people resources and then
    we would have a real reason for a recession or a depression. We need to get out of a one "ism" straightjacket, and get on with Mixturism.
    Why will the News Media not discuss something that will work, but instead they all gather down at the same barn and stir in the same pile of cow manure. Then they talk about no bull no bias.

    April 30, 2009 at 6:25 pm |
  14. Bryan, Ontario, Canada

    No mention of the commercial credit losses yet to come.

    April 30, 2009 at 6:15 pm |