GUY RAZ, host:
This past week's financial news was filled with mixed messages. Goldman Sachs and JP Morgan both reported huge quarterly profits. And yet CIT, one of the nation's largest commercial lenders, is on the verge of collapse. The Feds says unemployment will top 10 percent, manufacturing and exports are stagnant but consumer spending is up, so is the stock market.
So what's going on? Well, apparently the recession is over. Or at least that's what the folks at the Economic Cycle Research Institute say, and they have been pretty dead-on so far.
Lakshman Achuthan is managing director at ECRI, and he joins us. Welcome.
Mr. LAKSHMAN ACHUTHAN (Managing Director, Economic Cycle Research Institute): Thank you.
RAZ: So, you guys are saying the recession is over. How do you come to that conclusion?
Mr. ACHUTHAN: The reason we're so convinced, and we are quite convinced, that the recession is drawing to a close is because of leading indicators. You mentioned a number of different pieces of information that have come out, and some of them might be positive and some of them might be negative. What we do is group these into which ones lead the business cycle and which ones coincide with activity right now, today.
Mr. ACHUTHAN: And then even those that lag. And this sequence of leading, coincident and lagging indicators our group has been looking at for three generations now, we see a very robust sequence of events that always occurs at the onset of recession and the end of recession, where the leading indicators move first, then the coincident, then the lagging measures of the economy; which include, for example, the unemployment rate.
RAZ: So, what are some of the leading indicators right now?
Mr. ACHUTHAN: Well, they include drivers of the economy, which are housing activity, productivity, money growth and things that are going on in credit.
RAZ: And you're seeing an improvement in all of these?
Mr. ACHUTHAN: Yeah, the key is that it's - there's no one piece that we're hanging our hat on. It is a pervasive upturn in these leading indicators. And that is the hallmark of something that is going to persist for a few quarters, a year at least. And it is going to be pronounced. It's not going to be a tiny blip that you can't identify as a recovery. It's going to be something that you cannot deny.
RAZ: So pervasive, persistent and pronounced rises...
Mr. ACHUTHAN: That's the three Ps, as we call them.
RAZ: …in the different kinds of indicators.
Mr. ACHUTHAN: Leading indicators, right.
RAZ: So, what are we looking at tangibly now? I mean, you're pretty confident that the recovery will begin very, very soon.
Mr. ACHUTHAN: Yeah, it's imminent, this summer. And, you know, the exact date is pretty much unknowable or just a guess.
RAZ: But how do you know? I mean, what are you looking at?
Mr. ACHUTHAN: Well...
RAZ: What numbers are you looking at exactly?
Mr. ACHUTHAN: When you don't approach these indicators with a predetermined view, when you're objective, and you add them up into a leading index, then you end up with what I'd like to call is a one-armed economist.
You know, President Truman was famously quoted as saying, you know, I'm sick of all this on the one hand. On the other hand, bring me a one-armed economist.
(Soundbite of laughter)
Mr. ACHUTHAN: And that's what we have with these leading indexes, and they are shooting up.
RAZ: But what's not clear is, I mean, things like exports...
Mr. ACHUTHAN: Yeah.
Mr. ACHUTHAN: Yeah.
RAZ: ...I mean, they don't seem to be going anywhere. So, how is it that we are emerging from this recession?
Mr. ACHUTHAN: Well, that's one entirely true. The first thing that's happening is everything is getting less bad. So...
RAZ: It's all bad, essentially.
Mr. ACHUTHAN: It's still bad. They're still growing negative, so I think the recession, as far as I know at this second, is still on. But it's less negative than it was a few months ago. When the pace of the recession begins to ease, as it has already, that's a fact not a forecast, over the past 75 years, the recession has ended within four months.
RAZ: Have these indicators ever been wrong?
Mr. ACHUTHAN: Not on this score, no. And this is what's so amazing. I've been doing this since 1990. I was taught by Jeffrey Moore who's the father of leading indicators. In the time that these indicators have been in existence, they have not made a mistake on a recession or a recovery call. I'm sure we're going to make a mistake at some time; I hope it's not now.
(Soundbite of laughter)
But I mean the thing is also there is no Holy Grail. We have an array of leading indexes. We have over a dozen for the U.S. They are all moving up.
RAZ: Well, some good news at least, even if we can't yet feel it.
Mr. ACHUTHAN: Right.
RAZ: Lakshman Achuthan is the managing director of the Economic Cycle Research Institute. He joined us from New York.
Mr. Achuthan, thanks so much.
Mr. ACHUTHAN: Thank you.
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