Double Dipping Slipping

In the past few days, several people and organizations have questioned whether the economy is falling back into a recession (double-dip or “W”recovery). The last double-dip recession in the U.S was the early 1980’s.

Our opinion is the economy never really recovered from the notable downturn beginning in late 2007, and for that matter never recovered from the 2001 recession (technology bubble burst).  It’s our lost decade – in terms of economic growth, jobs and the stock market.

Nevertheless, there are some lighthearted articles about the topic.  Here’s a snapshot from Zero Hedge: 

You know we’re headed for a double-dip when:

• What you thought was your cable bill, turns out to be your 401k statement.
• Your mortgage shows up on eBay.
• You buy $50 of GM stock, and are named to the board.
• The family dog asks for a severance package.
• Your parents move to Greece.

There’s even a new song by Merle Hazard about a potential double-dip recession.  For a more granular opinion, Yahoo! Finance lists 22 cities in danger of a double-dip recession.  Lastly, there’s the conventional approach to economic forecasting using leading indicators published by the Economic Cycle Research Institute (ECRI).  Given its perfect forecasting record of recent, what is it forecasting?  A double dip recession, as indicated at DailyFinance.

Our opinion?  Psychology plays an important role: if you think you’re beaten, then you’re beaten.

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Note: Footnotes for the first chart may be found at the link provided above (early 1980’s at Wikipedia).  To summarize, (1) blue line is percent change from preceding period in real gross domestic product (annualized; seasonally adjusted) and (2) red line is average GDP growth 1947–2009.

Update 2 Sep. 2010: Given several people have asked about further feedback concerning the ECRI, its managing director, Lakshman Achuthan, provides an overview in this interview on Yahoo! Finance.