If you think the U.S. economy is in bad shape, you havent seen anything yet, warns a leading research institute.
Worse yet, the forecaster says there's nothing Washington policymakers can do to head off recession, and all Florida lawmakers can do is chop another $2 billion from the state budget.
The Economic Cycle Research Institute predicts that the national unemployment rate, currently at 9.1 percent, will hit double-digits by next year and that the federal deficit, already above $1 trillion, will soar higher.
"Its important to understand that recession doesnt mean a bad economy -- weve had that for years now. It means an economy that keeps worsening, because its locked into a vicious cycle," the New York-based ECRI said.
"A new recession isnt simply a statistical event. Its a vicious cycle that, once started, must run its course. Under certain circumstances, a drop in sales, for instance, lowers production, which results in declining employment and income, which in turn weakens sales further, all the while spreading like wildfire from industry to industry, region to region, and indicator to indicator," the ECRI report stated.
If the United States isnt already in a recession now, its about to enter one, said Lakshman Achuthan, the institutes chief operations officer.
ECRIs recession call isnt based on just one or two financial barometers, but on dozens of specialized leading indexes, including the U.S. Long Leading Index, which was the first to turn downbefore the Arab Spring and Japanese earthquake, to be followed by downturns in the Weekly Leading Index and other shorter-leading indexes.
Using its multiple matrices, ECRI has correctly called three recessions without any false alarms in between. In contrast, most of those who have accurately predicted a recession or two have also been guilty of crying wolf -- in 2010, 2005, 2003, 1998, 1995 or 1987.
"More than three years ago, before the Lehman debacle, we were already warning of a longstanding pattern of slowing growth. At least since the 1970s, the pace of U.S. growth -- especially in GDP and jobs -- has been stair-stepping down in successive economic expansions," ECRI said.
"We expected this pattern to persist in the new economic expansion after the recession ended, and it certainly did.
"We also pointed out -- months before the recession ended -- that because the 'Great Moderation' of business cycles (from about 1985 to 2007) was now history, the resulting combination of higher cyclical volatility and lower trend growth would virtually dictate an era of more frequent recessions."
ECRI said it "comes as no surprise," with the latest expansion only a couple of years old, that the United States is again facing a new recession.
"Actually, such short expansions are hardly unheard of. From 1799 to 1929, nearly 90 percent of U.S. expansions lasted three years or less, as did two of the three expansions between 1970 and 1981," the report stated.
The ECRI forecast conflicts with the Blue Chip survey released on Friday. That consensus claimed the slowing economy is still growing modestly, and that it will continue to do so.
On average, the economists included in the tally foresaw a growth rate of 2 percent in 2012. In January, the consensus prediction for 2012 was a growth rate of 3.1 percent.
The New York Times noted that economists have been ratcheting down their projections.
Jan Hatzius and Dominic Wilson, two Goldman Sachs economists, predicted that France and Germany would soon fall into a mild recession, contributing to a slowdown in the United States, where they put the odds of a new recession at 40 percent.
In congressional testimony last week, Federal Reserve chairman Ben Bernanke lowered his own forecast and said the U.S. economy was close to faltering." But he stopped short of predicting a recession.
Achuthan said that the GDP rate is likely to go negative by the first quarter of 2012, if not sooner. Recession is technically defined as two consecutive quarters of no GDP growth.
For the foreseeable future, he said, More frequent recessions are likely to be the norm.
With Congress unlikely to pass President Barack Obama's $445 billion jobs bill, Democrats appear to be out of ideas -- except to campaign on Republican refusal to support the stimulus measure that includes a 5.6 percent tax increase on millionaires and billionaires.
GOP Sens. Rand Paul, R-Ky., and John McCain, R-Ariz., this week plan to unveil a jobs package that will involve no additional federal spending, taxing or borrowing.
Whatever the Wall Street prognosticators say, Main Street has been feeling a financial pinch even more painful than the last official recession.
Between June 2009, when the latest recession officially ended, and June 2011, inflation-adjusted median household income fell 6.7 percent, to $49,909, according to a study by two former Census Bureau officials.
During the latest official recession -- from December 2007 to June 2009 -- household income fell 3.2 percent.
In Tallahassee, Senate President Mike Haridopolos predicted another round of state budget cuts as lawmakers learned that revenues could fall another $2.25 billion in the coming year.
"We're not that optimistic at all," said Haridopolos, R-Merritt Island. "We're all hopeful that the economy will turn around. But at this point, we don't see it."
As Florida's unemployment rate remains at 10.7 percent, state economists are expected to announce their latest revenue projections Tuesday.
The current $69 billion state budget required $4 billion in spending cuts, and Gov. Rick Scott has already directed agencies to prepare for an additional 10 percent reduction in spending.
Though Republican legislative leaders continue to rule out tax increases, Haridopolos said he would consider additional tuition hikes at state colleges and universities as a way to constrain higher-education outlays.
Contact Kenric Ward at kward@sunshinestatenews.com or at (772) 801-5341.
