Foreshadowing The Recession of 2013

Updates

January 30, 2013: This post started as way of tracking the economy leading up to 2013 where data points suggested the likelihood of a "Great Recession" in 2013. Late in 2012 and early in 2013, things seemed to be turning around. Then, on this date, the government reported that the economy contracted for the first time since "the" recession ended -- and the contraction was unexpected.

So, now back to this past: tracking general economic activity through 2013.

Original Post

For archival purposes only.

Corporate America will cut back on jobs and hours due to rising cost of employees after January 1, 2013. The stories are already out there. It was going to happen regardless (due to the 29-hour week mandated by ObamaCare) but the severity of the job cuts will be exacerbated by the uncertainty colloquially referred to as the "fiscal cliff." Everyone now agrees that taxes, fees, and/or health care premiums will go up for every US citizen in 2013. Taxes may be the least regressive, but fees and health care premiums will be highly regressive. (Taxes may be less regressive, but loopholes easier found in tax code than in fees and health care premiums.)

This is not unexpected. As the US continues its transition to "a new economic and sociopolitical worldview and method of socioeconomic inquiry" one should expect significant jolts to the system. 

Speaking of jolts. Last night in the dark and fairly heavy rain, I was barreling down the sidewalk toward another intersection. Over the years, most cities have removed curbs for wheeled vehicles to move seamlessly from street to sidewalk, and so it was at this particular intersection. But in the dark, it was very, very difficult to find the "path." At the last moment, I saw it and had not choice to take it. If I did not take the "path" I would hit an 8-inch curb and go "head-over-heels." It was amazing how fast I was able to make that decision, turn, hit the "path," miss the curb, and prevent a major mishap. It was all over in a nanosecond. 

Unfortunately, at the end of that nanosecond, I was headed directly for a huge, grand, old (oak?) tree, head-on. The only thing, in retrospect: hitting the tree was preferable to hitting the curb. Hitting the curb would have been "head-over-heels" and probably a broken neck; hitting the tree head-on could be averted by a slight turn resulting in a glancing blow and a sliding, careening spill. I gripped the handlebars very, very firmly, headed for the tree, and at the last nanosecond (again) pulled slightly right. I missed the tree by a margin that I would not care to repeat. 

That's how I see 2013 playing out. The "fiscal cliff" and the next six months: we are headed for an 8-inch curb on a bicycle out of control, with "head-over-heels" outcome. The movers and shakers will avert the neck-breaking crash, but the question is whether we miss the tree. 

So, for archival purposes, tracking the business stories leading up to next summer.

Foreshadowing the Recession of 2013

January 30, 2013: economy unexpectedly contracts; GDP at -0.1%.

After several months of good news, some bad news: new home sales fall 0.3%, foreshadowing the great recession of 2013, CNBC, November 28, 2012.


Boston Globe: the state of Massachusetts is in trouble, going into 2013, November 25, 2012

Facing weaker than expected state tax revenues, Governor Deval Patrick’s administration has curbed state hiring, halted an automatic income tax reduction, and begun identifying cuts in spending that may be necessary to balance the budget.

Recent tax collections have been unexpectedly disappointing, failing to measure up to last year’s levels. In October, revenues were $162 million short of budgetary estimates and $48 million below the level reached in October 2011.

State revenues are running $256 million behind budget and $33 million behind last year’s actual collection, officials said.

One "fact" that is hard to refute: states have usually gotten into severe financial trouble under Democratic governors; states with Republican governors generally thrive. Just an observation.

This paragraph from the Boston Globe story above says it best:

“If this were happening at the beginning of a recession, it would be seen as . . . not a dramatic shortfall,” said Michael Widmer, president of the Massachusetts Taxpayers Foundation. “But when it comes in year five of this extended fiscal crisis, it’s a serious issue.”  -- Cue up Connie Francis.

In fact, I think one can predict where the jobs will be the next five years by looking at this map: map of the US, in color. The linked map looks very much like the rtw map.

Morgan Stanley: major recession in 2013, November 20, 2012

The bank’s economics team forecasts a full-blown recession next year, under a pessimistic scenario, with global gross domestic product (GDP) likely to plunge 2 percent.

“More than ever, the economic outlook hinges upon the actions taken or not taken by governments and central banks,” Morgan Stanley said in a report.

Under the bank’s more gloomy scenario, the U.S. would go over the “fiscal cliff” leading to a contraction in U.S. GDP for the first three quarters of 2013. In Europe, the bank’s pessimistic scenario assumes a failure of the European Central Bank (ECB) in cutting rates and a delay of its bond-buying program.

EU economic summit likely to end in failure; severe results, France24, November 18, 2012

Eurozone back in recession; since this was a foregone conclusion/predictable, not a headline, The Bismarck Tribune, November 15, 2012

President Obama agrees: taxes on middle class might bring on recession; will affect seasonal retail sales; hiring, November 14, 2012, Reuters/Yahoo (he's starting to understand)

Retail sales in US decrease for first time in four months, November 14, 2012, Bloomberg

Budget deficit rises to $120 billion in October, 22% increase, larger than expected; November 13, 2012, Reuters

Business spending falls off a cliff, November 9, 2012, Boston Globe

6,125 proposed regulations and notifications posted in last 90 days; average 68 per day, November 9, 2012, CNS News, 

McDonald's: reports first drop in same-store sales in nine years, November 8, 2012, WSJ