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Thursday, July 10, 2014

What Will an "Official" 2014 Recession Look Like?

Its now July meaning the beginning of fiscal quarter #3 for the year 2014, and it will take probably a couple more weeks for the official 2Q data to come out..

In 1Q, the US had negative GDP of -1.1% that was ultimately adjusted Down to officially -2.6% for the January-March months

"Everyone" blamed it on weather

So understanding full well that two quarters in a row of negative growth equals "official" recession, how is the data from 2Q shaping up?

Well..  Of course figures can be manipulated and contrived but still, don't expect a GDP growth miracle.
Today it came out that wholesale inventories rose only 0.5% in May.  This following April's +1.1%.

It is the slowest growth in 2014 and biggest miss of expectations since Dec 2013. Wholesale sales also fell back, missing expectations at +0.7%, to the slowest since Feb

Just another tea leaf at the bottom of a cup of soothing oolong which says within a couple weeks, the Administration, the financiers and puppet-string media can't pretend all is rosy recovery...

That in itself should be as refreshing as a mint julip

So what will it look like when the recession is made 'official'?
In a way it will look no different than now when you understand as we've often explained, we never got out of the first recession..

Its just been one never-ending economic sludge slog and how dramatically you felt it was based on whether you were employed, your expenses and how quickly you were/are burning through your savings and retirement nest egg (assuming you even had one)

But let's get beyond that.  What will things look like when summer hits autumn and reality seeps in..

Obviously for one, expect those monthly job hiring figures to begin plunging as companies and corporations use the downturn as they always do, to shed salary 'weight' and maximize profits..
Shareholders love seeing people fired because to them, it usually means the company is going to be run more efficiently and that increases profits and their dividends..

And companies only exist to appease n' please their shareholders.. no one else..

If the big corporations are successful in getting this 'downsizing' ball rolling (these things are usually coordinated behind the scenes to prevent fired employees from playing one corp off another for better wages), then expect another round of massive layoffs..

And ultimately some companies will use the economic conditions as the perfect time to file for protective bankruptcy, which allows them to close stores and shed more jobs without as much negative taint..
To be fair, this cycle of businesses hiring and firing en masse always occurs regardless of the national or global economic conditions..   When its a recession, its called 'downsizing' and when the economy is strong, its called 'restructuring'..

Just meaningless words but with the same goal-- retard/stifle wages..

So whether this upcoming recession looks and feels as bad as the 2007 one really depends a lot on how profitable it is for companies to dump people now or wait till after Christmas when there will be a better gauge to see how long the recession will last..

Of course with all that precious taxpayer money going into the stock market so the rich can get richer and companies can appear strong on paper, the economic benefits of a recession could put the Dow over 18k before the year is out..
Or it could drop a few thousand points..

Just depends on how much cash corporations wish to keep on the sidelines vs in the market..

It also has to do with interest rates..

They can't be kept at zero forever and negative interest as introduced a month or so ago in Europe has never ever been attempted before so if its brought to US banks it will do nothing but dramatize the pain when the Fed finally gets the courage to raise rates...

Banks and other borrowers of benefit will have a brutal time repaying and then you will really see economic ripples permeate every aspect of society down to the bottom..
And if the Fed doesn't want to raise, ultimately Investors will want a bigger profit return from their risk and press n' press it until it comes about..

And from that we could ultimately be looking again at late 1970s Carter era interest rates for mortgages, auto loans, credit cards, etc..

There are a lot of ways corporations and Wall Street profit off a recession but have held back because for them, there was still profit to be made and gained through the propaganda lie of 'recovery' and all that feel-good hokum..

When 'official' recession hits, everyday people finally embrace it and tighten purse strings knowing its going to last more than a couple months, then business will kick into recession-mode
But don't worry..  Come September there will still be NFL and college football and a new Fall TV season..

And new movies to see at the theater every week and new CDs to buy or illegally burn, and all those fun autumn/winter holidays to come..

One will not have to work hard to find distraction unless..

Well..  Unless the victim of the upcoming recession is you.