Marketplace Report: U.S. Already in a Recession?

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One Chicago-based organization argues that, contrary to the beliefs of many economists, the United States is already in a recession. Steve Tripoli of Marketplace talks with Madeleine Brand about that maverick economic assessment.


Back now with DAY TO DAY. I'm Madeleine Brand. Recession is in the air, at least according to one economic forecast out this week. Steve Tripoli from MARKETPLACE joins me now. And Steve, a recession? How can that be? All the economic reports lately say that while growth is sluggish, the economy is still growing.

STEVE TRIPOLI reporting:

That's right, Madeleine, but these contrarian forecasts say that the growth may not be real. Jack Bishop from Kingsbury International runs something called the Chicago Business Barometer. This measures economic activity based on what corporate purchasing managers are buying. Here's his explanation of why what's being counted as economic activity might turn out to be non-existent.

Mr. JACK BISHOP (Kingsbury International): Buyers order more than once. They may try to fill the same order from three different suppliers. Only one will get the order. What happens is, it creates a mob effect, where the demand appears to be higher than it really is, and that can go on for a while until all of a sudden the orders aren't there, and then things start to fall apart, and fall apart rather rapidly.

BRAND: And he seems to think that that's happening or about to happen?

TRIPOLI: That's right. And it has happened before. He believes that this period looks a lot like the 1973-75 recession. Economic activity back then had slowed down for fully two years before most folks even realized it. And Bishop has some credibility here. The Chicago Business Barometer has accurately called four of the past five recessions.

BRAND: Well, it's safe to say, Steve, right, that most economists don't agree with him?

TRIPOLI: That's right, and even Bishop isn't guaranteeing we're in a recession. But he does have one very interesting ally here, and that's a group called the Economic Cycle Research Institute. They also have an especially good track record of calling recessions when many others didn't. And this group is not saying we're in a recession yet, but they are also saying that the risks are piling up in ways that historically, at least, appear to be ominous.

BRAND: So why might his take on the economy be wrong?

TRIPOLI: Well, because this morning's new jobs report shows that people are still working, and incomes and factory orders are up, and because we might weather a housing slump and higher personal debt loads and high energy prices and the impact of all those on spending. That's if America can keep working through all that.

BRAND: I have to say, Steve, this is kind of frustrating. How do you know who to believe in this?

TRIPOLI: How do you ever know? You know that old joke about economists: they've successfully predicted six out of the last three recessions? But I would keep my eye on two things, Madeleine. The first is all those economic risk factors piling up. There's another old economist saying, that says if something can't go on forever, it won't. And the second thing to look out for is more subtle. Economy watchers know that the government, Wall Street, and the Federal Reserve have their own reasons for not openly predicting recessions even when they see these risks piling up. And even from those circles there's more openly expressed caution these days. So read the tea leaves.

And by the way, since we're talking economic pulse readings today, Madeleine, coming up later on MARKETPLACE, we'll examine the direction of Mexico's economy as President Vicente Fox gives his final state of the union address.

BRAND: Thank you very much, Steve. Steve Tripoli of Public Radio's daily business show MARKETPLACE, produced by American Public Media.

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