Apparently ECRI’s Lakshman Achuthan was on Bloomberg late last week to talk about his U.S. recession call from last month and,  in his weekly commentary today, John Hussman brings us the sad news that the recession hasn’t been canceled – it’s just been delayed.

As noted last week, we continue to estimate a very high probability of oncoming recession.
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That view is clearly shared by the Economic Cycle Research Institute, where Lakshman Achuthan noted on Bloomberg last week that “forward looking data since two months ago has remained weak, it’s getting weaker, it’s not turning up. So, to my fellow forecasters out there, I’d say they’re roughly in two camps. There are those who say that the economy is firming and will continue to firm into next year. We reject that. There’s nothing there that suggests that at all. I think there’s a larger camp that says we’re going to muddle through; we’re going to get this kind of slow growth, ‘I’m not terribly optimistic, but we’re going to muddle through.’ I would point out that that’s never happened. We never muddle through. A market economy does not want to have a static state. It either accelerates or it decelerates, and these forward looking indicators say decelerate.”

Achuthan also noted that “the other half of the GDP report,” gross domestic income or GDI (which tends to be the more accurate measure of GDP) was up just 0.3% in the most recent quarter. The Federal Reserve has observed that when GDP and GDI differ, the GDP figure tends to be revised toward GDI, not the other way around. Achuthan warned that the GDI figures are “a big red recession signal.” In response to the question “You had a recession call, what happened?,” Achuthan simply answered “It’s happening.”

Those preferring the “glass half full” version might want to have a look at this Bloomberg article today U.S. Economic Data Surprising Forecasters, where, right off the bat you learn that “U.S. economic data are outperforming expectations by the most in nine months” and, later on, a plethora of other economic indicators are at their highest levels in nearly a year.

According to the latest survey from the Kauffman Foundation, top economics bloggers in the U.S. (of which yours truly was one) have a very dim view of the economy, only half of the respondents seeing employment growth in the next three years with their survey responses providing all the input for the dismal word cloud below.

Full results are available in this report(.pdf) where one will learn that almost two-thirds of respondents said the government is too involved in the economy and political party affiliation is not what one might expect of a group heavy on economics professors – 39 percent independent, 19 democrat, 8 republican, 34 not disclosed.

As the nation laments the dim prospects for its labor market on this Labor Day, we see another example of how the fundamental problem behind the bleak jobs picture fails to be understood, this story by Zachary Roth at The Lookout regurgitating what passes for conventional wisdom these days when it comes to root causes, citing a lack of consumer demand (irrespective of how the prior demand levels were attained) and providing more evidence that conventional wisdom is often wrong.

Right now, what’s holding back the economy is a lack of demand, in the form of consumer spending. And that lack of demand stems largely from the enormous loss of housing wealth that occurred in recent years. Until the housing sector picks up, the economy as a whole will struggle. And a successful mortgage modification program could have helped quite a lot.

But there’s something else worth keeping in mind: Economic shocks like the one we went through with the housing bust and the financial crisis take a long time to recover from. In a paper written last year for the Federal Reserve Bank of Kansas City, the economists Carmen and Vincent Reinhart, experts on the history of such crises, concluded that the effects typically linger for around a decade. “Income growth tends to slow and unemployment remains elevated for a very long time after a severe shock,” they wrote, predicting “a lengthy period of retrenchment.”

Until you start hearing policy makers and economics writers say, “Much of the economic growth we’ve seen in recent decades has been due to the unsustainable rise in asset prices and an unhealthy increase in debt at all levels – government, corporate, and personal. We must acknowledge these as the root causes and restructure the economy and financial markets accordingly before we can move forward in a meaningful way”, we’re not likely to make much progress in creating jobs or restoring the once robust levels of economic growth the U.S. has become accustomed to, if that’s even possible.