Tags: Achuthan | us | Recession | economy

Lakshman Achuthan: A New U.S. Recession is Inevitable

Monday, 27 February 2012 08:04 AM

The U.S. cannot avoid dipping back into a recession as gains in the labor market have not been enough to prevent industrial and overall economic growth from flatlining before turning downward anew, says Lakshman Achuthan, co-founder of the Economic Cycle Research Institute.

Expect the downturn to hit by late summer.

"Now that we have several months of definitive hard data, this is not a forecast," Achuthan says, according to CNNMoney. "Basically, growth has flatlined."

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

While industrial output, incomes and spending have been growing since the last recession, the pace of that growth is slowing, which makes a downturn unavoidable due to a lack of support.

That will be the case even if high prices don't spike higher than expected or the European debt crisis spirals out of control.

Don't call the downturn a double dip either, as too much time has passed from the last economic contraction to peg this next one as a related event.

Unemployment rates are improving, but they are just following improvements seen in other indices.

"Job growth always follows consumer spending growth, not the other way around," Achuthan says.

That also means that unemployment rates won't spike when the next recession strikes but during the downturn and continue afterward, as part of its nature as a lagging indicator.

The entire world may end back in recession or close to it if oil prices keep rising, other experts say.

Gasoline prices in the U.S. are hitting record-high levels in parts of the country thanks to Iran's threats to close the Strait of Hormuz to protest sanctions from the West for Tehran's nuclear ambitions.

"The West's determination to prevent Iran acquiring nuclear weapons is coming at a price — a price that might include a second global recession triggered by an oil shock," said David Hufton from the oil brokerage PVM, according to Reuters.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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