Is United States in a Recession?
After the 80,000 decline in U.S. monthly payrolls for March (and substantial downward revisions to the two previous monthly tallies) as reported on April 4th 2008, there is considerable talk about whether indeed the United States is now in a recession. There also is considerable variation in how deep and how long such a recession period might last. As Toomre Capital Markets LLC ("TCM") attempts to make sense of these various forecasts, Lars Toomre is again reminded of a quote from Kelvin Throop III: Isn't it interesting that the same people who laugh at science fiction listen to weather forecasts and economists?
TCM is now wondering whether some of today's extreme economic downturns are not indeed science fiction. The United States economy is incredibly resilient. While there definitely is a downturn expanding throughout the upper mid-west states of Ohio, Indiana and Michigan, and there is a housing decline that is particularly acute on the perimeter states that experienced extreme housing increases in the last dozen years, total unemployment remains around five percent. As long as people continue to have jobs, there will be some spending and eventually the consumer sentiment numbers will improve.
The key question TCM is reflecting on is what happens if the consensus about projected amount of foreclosures proves to be wrong. The current consensus is that the total number of foreclosures will be close to 1.5 million. There are projections out in the investment community that foreclosures could total as much as four or even five million residences. If there latter projections come true, the United States definitely will slip into a recession that is extremely deep and prolonged.
In short, how does one get one's mind around foreclosure forecasts? And just how important is this emerging phenomena called "jingle mail" to this credit crisis? Reader thoughts and comments are welcome.