Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Evergrande China's Lehman's Moment, Tip of the Ice Berg in Financial Crisis 2.0 - 21st Sep 21
The Fed Is Playing The Biggest Game Of Chicken In History - 21st Sep 21
Focus on Stock Market Short-term Cycle - 21st Sep 21
Lands End Cornwall In VR360 - UK Holidays, Staycations - 21st Sep 21
Stock Market FOMO Hits September CRASH Brick Wall - Dow Trend Forecast 2021 Review - 20th Sep 21
Two Huge, Overlooked Drains on Global Silver Supplies - 20th Sep 21
Gold gets hammered but Copper fails to seize the moment - 20th Sep 21
New arms race and nuclear risks could spell End to the Asian Century - 20th Sep 21
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast 2021 Review - 19th Sep 21
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan
Gold Price Back Below $1,800! - 10th Sep 21
The Inflation/Deflation debate wears on… - 10th Sep 21
Silver Price seen tracking Copper prices higher - 10th Sep 21
The Pitfalls of Not Using a Solicitor for Your Divorce - 10th Sep 21
Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
This Boom-Bust Cycle in US Home Ownership Should Give Home Shoppers Pause - 9th Sep 21
Stock Market September Smackdown Coming Next? - 9th Sep 21 - Monica_Kingsley
Crazy Crypto Markets How to Buy Bitcoin, Litecoin for Half Market Price and Sell for TRIPLE! - 8th Sep 21
Sun Sea and Sand UK Holidays 2021, Scarborough in VR 180 3D! - 8th Sep 21
Bitcoin BTC Price Detailed Trend Forecast Into End 2021 - 8th Sep 21
Hyper Growth Stocks - This billionaire is now using one of our top strategies - 8th Sep 21
6 common trading mistakes to avoid at all costs - 8th Sep 21
US Dollar Upswing, S&P 500 and Nasdaq Outlook - 7th Sep 21
Dovish Assassins of the USD Index - 7th Sep 21
Weak August Payrolls: Why We Should Care - 7th Sep 21
A Mixed Stock Market - Still - 6th Sep 21
Energy Metals Build Momentum; Silver & Platinum May Follow - 6th Sep 21
What‘s Not to Love About Crypto Market Fireworks - 6th Sep 21
Surging US Home Prices and Gold – What’s the Link? - 6th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Reasons Why U.S. Recession Has Arrived (Or Will Shortly)

Economics / Double Dip Recession Jun 22, 2012 - 03:07 AM GMT

By: Mike_Shedlock

Economics

Best Financial Markets Analysis ArticleI am amused by the Shadow Weekly Leading Index Project which claims the probability of recession is 31%. I think it is much higher.

When the NBER, the official arbiter of recessions finally backdates the recession, May or June of 2012 appear to be likely months. Let's take a look at why.


US Manufacturing PMI

Markit reports PMI signals weakest manufacturing expansion in 11 months

Key points:

  • PMI lowest since July 2011, suggesting slower rate of manufacturing expansion
  • Rate of output growth broadly unchanged
  • New orders rise at weakest pace in four months
  • Input costs fall for first time in three years

Manufacturing Output

Durable Goods Orders Plunge

New Orders - PMI New Orders Index

Those numbers do not look good but they are hardly disastrous. Here are some numbers that are disastrous.

Philly Fed Survey

For the second consecutive the Philly Fed Survey has been solidly in the red.

Business Outlook Survey June 2012

Those numbers are nothing short of a disaster.

The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, fell from a reading of -5.8 in May to -16.6, its second consecutive negative reading. Nearly 40 percent of the firms reported declines in activity this month, exceeding the 22 percent that reported increases in activity.

Indexes for new orders and shipments also showed notable declines, falling 18 and 20 points, respectively. Indexes for current unfilled orders and delivery times both registered negative readings again this month, suggesting lower levels of unfilled orders and faster deliveries.

Firms' responses suggest steady employment this month but shorter hours. The percentage of firms reporting higher employment (14 percent) edged out the percentage reporting lower employment (12 percent). The current employment index increased 3 points this month. Firms indicated fewer hours worked this month: the average workweek index decreased 14 points and posted its third consecutive negative reading.

Misguided Optimism

Business Outlook Survey June 2012

Note the misguided optimism about six months from now. It's not going to happen.

Why?

  1. Europe is a disaster.
  2. US manufacturing is cooling rapidly
  3. China is cooling rapidly: China Manufacturing PMI 7-Month Low, Sharpest Decline in New Export Orders Since March 2009
  4. US Monetary policy is at best useless, but more likely net harmful, especially to those on fixed income.
  5. First year presidential politics are frequently recessionary
  6. US still needs fiscal tightening
  7. Unemployment insurance has expired for millions: 200,000 Lose Unemployment Benefits This Week, Nearly Half From California
  8. Self-Employment desperation: 100% of U.S. Jobs Added Since 2010 Have Been Self-Employment, Contractor, or Other Jobs Without Unemployment Insurance Benefits
  9. Last two jobs reports have been dismal: Another Payroll Disaster: Jobs +69,000, Employment Rate +.1 to 8.2%, April Jobs Revised Lower to +77,000; Long-term Unemployment +310,000
  10. The 4-week moving average of weekly unemployment claims is at the highest rate of the year, at 386,250.
  11. New home sales cannot gain significant traction: New Home Sales Hype vs. Reality
  12. Tax Armageddon

Deficit spending has carried this "recovery" further than I thought it would, but the party is now over.

It will be difficult if not impossible to overcome the above set of circumstances regardless of what anyone feels about economic back-tested recession probabilities.

Taxmageddon

Please consider Taxmageddon

The Tax Foundation reports that because of higher federal income and corporate tax collections, Tax Freedom Day came four days later this year than last. And the bad news is that unless Washington takes action, it will take working Americans 11 more days to meet next year's tax burden.

That's all due to Taxmageddon -- a slew of expiring tax cuts and new tax increases that will hit Americans on January 1, 2013, amounting to a $494 billion tax hike. Heritage's Curtis Dubay reports that American households can expect to face an average tax increase of $3,800 and that 70 percent of Taxmageddon's impact will fall directly on low-income and middle-income families, leaving them with $346 billion less to spend.

Taxes Will Go Through the Roof

PolicyMic reports When the Payroll Tax Holiday Ends in 2013, Taxes Will Go Through the Roof
Without significant tax code changes, in 2013, America is scheduled to get hit with what would be the largest tax increase in our history.

Not only will the $1,000 per year tax holiday for a $50,000 income household disappear, come 2013 all Americans will see the tax on their first $8,700 of income jump from a 10% rate to 15% rate.

That hike will cost the majority of filers an additional $435.

For those eligible for child care tax credits that deduction will drop from $1,000 to $500. The marriage penalty will roar back into effect. The AMT, alternative minimum tax, will finally kick in.

Roll those changes up and a family filing as married with two children making $50,000, will see their taxes increase by basically $2,700.

Regardless of whether or not you feel taxes need to be raised, a big set of tax hikes is scheduled to happen.

To be sure, some of those hikes will be undone in compromises, but many if not most will sneak through.

Who is to blame for Taxmageddon?

Republican are to blame. They accepted this silly deal instead of a far better one that Obama would actually have signed.

But No! Republicans insisted on no tax hikes at all in 2012, putting everything off until after the election, believing Romney would win in a cake-walk.

However, if President Obama wins, certainly not at all an unlikely possibility, he is going to drive a much harder bargain this go around.

Regardless of tax consequences, the US is headed for recession, if not already in one. 2013 rates to be a disaster regardless who wins.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2012 Mike Shedlock, All Rights Reserved.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in