New U.S. Recession Already Here

** ARCHIV ** Hostess Kim Sturmhoefel geht am 19. Maerz 2004 am Microsoft-Stand auf der Cebit in Hannover eine Treppe hinab. Dem Software Hersteller droht eine Strafe der Europaeischen Union wegen Verstosses gegen EU-Wettbewerbsregeln in der erwarteten Rekordhoehe von 497 Millionen Euro. Am Mittwoch, 24. Maerz 2004, will Wettbewerbskommissar Mario Monti die Entscheidung verkuenden. (AP Photo/Joerg Sarbach) ---     Hostess Kim Sturmhoefel steps down some stairs at the booth of U.S. software giant Microsoft at the Cebit 2004 in Hanover, northern Germany, March 19, 2004. The European Union treathened Microsoft with an expected record fine of 497 million euro (US$ 612 million) for alleged antitrust abuses. An EU decision is expected Wednesday, March 24, 2004. (AP Photo/Joerg Sarbach)

We hear every day from the bean counters whose jobs require them to play in the Don’t-Worry-Be-Happy Band, whose favorite numbers (by which I mean their favorites, not ours) are “Recovery is Bustin’ Out All Over,” “Happy Days are Here Again,” and “When I am a Rich Man.” The other, independent bean counters are hard to hear amid the blaring brass, but if you pay attention you can hear what they’re yelling: the next recession has already started.

When the federal government reported yesterday on the growth of retail sales last month, there wasn’t any. Growth, that is. April sales overall were flat compared with March, with declines in autos, department stores, electronics & appliances, furniture and food & beverages. The strongest growth was in internet, sporting goods, restaurants & bars, and health store sales. Overall sales increased year to year, but by less than one per cent, the slowest growth since 2008. Wait, wasn’t that the year the last recession hit stride? What a coincidence.

This is hardly the first or only indication that the U.S. economy is in serious trouble. Federal agencies have reported just in the past week or so that consumer confidence is plummeting, and household spending is expected to nosedive. Last month, statistics on the gross domestic product in the first quarter of the year showed consumer spending to be weaker than at any time since World War II, except for the fourth quarter of 2008. Another coincidence.

The GDP report, whose bottom line was a dismayingly tiny growth of 0.2%, included another stunner. During the first quarter, privately held, unsold inventories of stuff increased by  $122 billion. Without the activity generated by putting all that stuff in storage somewhere, the GDP would have been down by 3% and all hell would have broken loose. The question now is, with consumer spending anemic and getting weaker, who is going to buy all that crap?

If American consumers suddenly decide to go shopping, by the end of this year they will have more than 6,000 fewer stores in which to do it. That’s how many store closings have been announced so far, including Radio Shack (1784), Office Depot/OfficeMax/Staples (625), Dollar Tree/Family Dollar (340), Barnes & Noble (223) Walgreen’s (200), Sears (77), see the full list here.

When the economy sputtered in January the apologists said don’t worry, it’s just a blip, lower gas prices will fix everything. When it was worse in February they said don’t worry, it’s the bad weather, spring will come and fix everything (but wait — doesn’t the small print on those guesstimates say “seasonally adjusted?”). When March missed expectations they said don’t you worry, April will blow your socks off. It’s mid-May and everyone’s socks are still on.

Without taking into consideration the collapse of oil fracking, now ongoing; or the frightening flight of money from the bond markets, now ongoing;  or the imminent eruption of the overheated casino stock market, expected any minute; the economy’s fundamentals indicate that recession, at least, has begun. So it’s too late to ask whether we’re going to have one. What we need to ask now is, how bad is it going to be?

Quick — another chorus of “Happy Days.”

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5 Responses to New U.S. Recession Already Here

  1. Avery says:

    Fun facts:
    – The shale breakeven price is $70.
    – The oil price now sits at $60-65.
    – When you add more rigs, it brings down the price.
    – They’re adding more rigs.

    The smell of desperation is strong. The facade of huge profits is falling away. Meanwhile, in the comments of the WSJ article, paid subscribers continue to repeat the narrative that Saudi Arabia is going down…

  2. Tom says:

    The recession began in 2008 (or 9) and hasn’t stopped as far as i’m concerned.
    Oh sure, the Fed and the Big Banks looked out for themselves first, then corporate Amerikkka followed suit, but the average citizen is left high and dry. This strategy can only last so long. Now that the majority of the citizenry is “tapped out” financially, the spending is slowing to a trickle (necessities) and now even the corporate sector is feeling the pain. i think the ‘death spiral’ of capitalism is starting to pick up speed and that once the food shortages hit, it will be game over for not only capitalism, but the entire global edifice of civilization.

    Thanks Mr. Lewis for another cogent reminder.

  3. Tom says:

    Avery: what do you make of this?

    Oil Rigs Down Almost Universally

    All rig count data is provided by Baker Hughes. All monthly charts are oil rigs only. Gas rigs are not included in the count. The last data point for all monthly charts is April 2015. [more]

  4. Cecille says:

    The band was singing this morning, “the market is UP, record highs!”
    another one from the playlist:
    (sing-along begins at 1:40)

    Thanks for another great blog post. I look forward to each new post. Your commenters are awesome, too.