More Economists Recant on Recession Call

As I wrote here recently, the US is not currently in a recession.

Now we learn from last Wednesday's Wall Street Journal that more economists are retracting their earlier insistence that the US is, or shortly will be in a recession. The article begins,

"A funny thing happened to the economy on its way to recession: It's taken a detour.
That, at least, is the view of a growing number of economists -- including some who not long ago were saying a recession was all but inevitable. They note that stock and credit markets have steadily improved since the Federal Reserve intervened to keep Bear Stearns Cos. from bankruptcy in early March, while a series of economic reports have been stronger than expected."

It figures. The mass of mediocre economists, having rushed to pre-guess evolving economic data, now see that GDP growth has yet to go negative. Usually not ones to let facts get in the way of a gloomy economic story, now these less-than-first-rate economists are reversing course.

For instance, as the Journal continues,

"In February, Global Insight joined Goldman Sachs, Morgan Stanley, UBS and Merrill Lynch in declaring the U.S. to be in recession. Now, Global Insight's Brian Bethune says that while the firm is still forecasting a recession, "it's conceivable we could avoid it," thanks to "the massive policy response we've seen" since he and others began warning about the risks facing the U.S. economy.
Bruce Kasman, chief economist at J.P. Morgan, said while earlier this year it seemed like momentum was carrying the economy into a clear recession, there's only "a slightly better than even chance" of a recession now. "Even though there are meaningful drags from the credit crisis and energy costs, the economy is showing resiliency," he said.

Even Alan Greenspan, who in early April said the U.S. was in the "throes of recession" and is going through the "most wrenching" crisis since World War II, has more recently toned down the warnings, saying the U.S. is in an "awfully pale recession." George Soros, who has long argued the U.S. is headed for a major crisis, also recently remarked that the "acute phase" of the crisis has now passed."

It's beginning to look like only Brian Wesbury and perhaps David Malpas, late of Bear Stearns, got this one right. The US economy has certainly softened, but is yet to actually go into reverse.

Still, even the Journal hesitates, as the article concludes,

"The question remains open, since recessions typically aren't officially diagnosed until some time after pain hits consumers. A common definition of a recession is at least two consecutive quarters of negative GDP. But the National Bureau of Economic Research -- the nonprofit group that is the official arbiter of when recessions begin and end -- defines a recession as a period of significant decline in economic activity across GDP, income, employment and retail sales that lasts more than a few months.

John Lonski, Moody's chief economist, said recent labor market data and signs the credit crunch is easing on Wall Street have made him less gloomy than he was a few months ago. In the latest WSJ.com survey of economists, conducted in May, he said the likelihood of a recession was 60% -- down from the 90% he predicted in the April survey.

"Recent evidence suggests there's a chance the economy might stabilize before this summer," he said. On average, the 55 economists in the survey, conducted earlier this month, said the likelihood of a recession was 62.7%, down from 70%."

Maybe the mark of a good economist is that s/he doesn't change her/his mind during the period when s/he calls an economic turn, and is correct.

This whole drama regarding the forecast recession that hasn't, and probably won't, arrive, simply gives more credence to the boatload of economist jokes- like how, if laid end to end, they still wouldn't reach a conclusion......