The last time the U.S. economy suffered through a double-dip recession, this country was struggling to overcome the fallout from an Arab oil embargo, Vietnam War-era deficits, and an inflationary spiral that just wouldn't let go.
That 1981-82 double-dip downturn - the result of an economic "shock treatment" aimed at curing those ills - consisted of two recessions that were separated by a single quarter of growth.
The current backdrop is very different from the one that was in place back then, but the threat of a double-dip recession is no less real. Indeed, with each passing week, and with every new economic report that comes out, the possibility that the U.S. economy will backslide into a double-dip recession seems to become more of a probability - or even a likelihood.
"For me a 'double-dip' is another recession before we've healed from this recession [and] the probability of that kind of double-dip is more than 50%," Robert Shiller, professor of economics at Yale University and co-developer of Standard and Poor's S&P/Case-Shiller home price indexes, told Reuters. "I actually expect it."
Double-Dip Recession
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Question of the Week: Investors Preparing for Double-Dip Recession
The "pause" button has been hit on the U.S. economic recovery, fueling worries that we're headed for a double-dip recession.
"We're in a pause in a recovery, a modest recovery, but a pause in the modest recovery feels like a quasi-recession," Former U.S. Federal Reserve Chairman Alan Greenspan said in an interview on NBC's "Meet the Press" broadcast last Sunday.
Greenspan touched off speculator interest in a double-dip downturn when he announced that a further decline in home prices could push the economy into a new recession.
"We're in a pause in a recovery, a modest recovery, but a pause in the modest recovery feels like a quasi-recession," Former U.S. Federal Reserve Chairman Alan Greenspan said in an interview on NBC's "Meet the Press" broadcast last Sunday.
Greenspan touched off speculator interest in a double-dip downturn when he announced that a further decline in home prices could push the economy into a new recession.
Strong Second-Quarter Earnings Can't Keep the Bears at Bay
The second-quarter earnings season has gotten off to a strong start, but it's been no match for bears who are less than thrilled with future earnings prospects.
More than half of the companies on the Standard & Poor's 500 Index have reported second-quarter earnings results. And so far, they've been strong, with two-thirds of those companies beating earnings estimates, three-fifths beating on sales and almost half beating on both earnings and sales.
As a result, the consensus second-quarter earnings per share estimate has climbed to $20.63 from $19.60 at the beginning of the month. Merrill Lynch analysts expect final second-quarter earnings per share to come in at $20.75 - a 5% sequential improvement from the first quarter.
That would be a deceleration from the 15% sequential growth seen between the fourth quarter of 2009 and the first quarter of 2010, but it's good growth nonetheless. In fact, it puts 2010 S&P 500 earnings at about $83 per share. And at current prices, that gives the market a price-to-earnings multiple of just 13.3-times - below the long-term historical average of 15.
More than half of the companies on the Standard & Poor's 500 Index have reported second-quarter earnings results. And so far, they've been strong, with two-thirds of those companies beating earnings estimates, three-fifths beating on sales and almost half beating on both earnings and sales.
As a result, the consensus second-quarter earnings per share estimate has climbed to $20.63 from $19.60 at the beginning of the month. Merrill Lynch analysts expect final second-quarter earnings per share to come in at $20.75 - a 5% sequential improvement from the first quarter.
That would be a deceleration from the 15% sequential growth seen between the fourth quarter of 2009 and the first quarter of 2010, but it's good growth nonetheless. In fact, it puts 2010 S&P 500 earnings at about $83 per share. And at current prices, that gives the market a price-to-earnings multiple of just 13.3-times - below the long-term historical average of 15.
We Want to Hear From You: Are You Preparing for a Double-Dip Recession?
The "pause" button has been hit on the U.S. economic recovery, fueling worries that we're headed for a double-dip recession.
"We're in a pause in a recovery, a modest recovery, but a pause in the modest recovery feels like a quasi-recession," Former U.S. Federal Reserve Chairman Alan Greenspan said in an interview on NBC's "Meet the Press" broadcast Sunday.
Greenspan touched off speculator interest in a double-dip downturn when he announced that a further decline in home prices could push the economy toward a new recession.
"We're in a pause in a recovery, a modest recovery, but a pause in the modest recovery feels like a quasi-recession," Former U.S. Federal Reserve Chairman Alan Greenspan said in an interview on NBC's "Meet the Press" broadcast Sunday.
Greenspan touched off speculator interest in a double-dip downturn when he announced that a further decline in home prices could push the economy toward a new recession.
Insights on ECRI: Is This Stock-Market Prophet Calling for a Double-Dip Recession?
The Economic Cycle Research Institute - referred to as the "ECRI" by anyone in the know on Wall Street - has correctly called every U.S. recession during the last 45 years.
To work its magic, the ECRI charts the weekly changes in an index of Leading Economic Indicators (WLI). Market professionals like myself very quietly use the same group of indicators to call market tops and bottoms. The indicators are so accurate in terms of what they have to say about the future that I refer to ECRI and the WLI as "The Prophet."
Given the Prophet's 100% hit rate over the last half century, investors should definitely take heed of the warning signals that this economic seer of seers is making right now.
To see if the ECRI has labeled this as a "double-dip" recession, please read on...
To work its magic, the ECRI charts the weekly changes in an index of Leading Economic Indicators (WLI). Market professionals like myself very quietly use the same group of indicators to call market tops and bottoms. The indicators are so accurate in terms of what they have to say about the future that I refer to ECRI and the WLI as "The Prophet."
Given the Prophet's 100% hit rate over the last half century, investors should definitely take heed of the warning signals that this economic seer of seers is making right now.
To see if the ECRI has labeled this as a "double-dip" recession, please read on...
Wall Street's Mood Shift Is Signaling a Profit-Making Price Push Ahead
A mood of mild optimism has begun to spread down Wall Street not long after there was nothing but long faces. Fancy that.
More good news out of Europe, better-than-expected new home sales, and the latest of a solid second-quarter earnings season has helped resuscitate the animal spirits that were missing in action since the spring.
Stocks rose past some key milestones in their historic July over the past week, pushing the Dow Jones Industrial Average just barely into positive territory for the year. It was a very professional, low volatility rally this week, a welcome change from the intra-day dramatics that had put everyone on edge lately.
What has really changed from the point of view of government policy or corporate results? Nothing and everything.
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More good news out of Europe, better-than-expected new home sales, and the latest of a solid second-quarter earnings season has helped resuscitate the animal spirits that were missing in action since the spring.
Stocks rose past some key milestones in their historic July over the past week, pushing the Dow Jones Industrial Average just barely into positive territory for the year. It was a very professional, low volatility rally this week, a welcome change from the intra-day dramatics that had put everyone on edge lately.
What has really changed from the point of view of government policy or corporate results? Nothing and everything.
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To find out what’s changing on Wall Street, click here
Buy, Sell or Hold: United Technologies Corp. (NYSE:UTX) is Really Taking Off
We have already seen strength in industrial sales in many companies, but today's recommendation may be the most promising yet. United Technologies Corp. (NYSE:UTX) is hitting on all cylinders and is poised for both long and short-term gains.
The company reported earnings and hit it out of the ballpark. UTC reported quarterly earnings of $1.20 per share - even including the loss of 12 cents a share due to restructuring charges. That's 4 cents higher than analysts had expected - 16 cents higher, if you take out the one-time restructuring charges.
The good news did not stop there, either. UTC raised its guidance and share repurchases for the year, despite new challenges in Europe. Sales beat expectations and profit margins were higher across the board. Engine maker Pratt & Whitney and international elevator brand Otis were especially strong. That's remarkable considering the market's fear of a double-dip recession and the U.S. Federal Reserve's "uncertain" status about the strength of the economy.
The company reported earnings and hit it out of the ballpark. UTC reported quarterly earnings of $1.20 per share - even including the loss of 12 cents a share due to restructuring charges. That's 4 cents higher than analysts had expected - 16 cents higher, if you take out the one-time restructuring charges.
The good news did not stop there, either. UTC raised its guidance and share repurchases for the year, despite new challenges in Europe. Sales beat expectations and profit margins were higher across the board. Engine maker Pratt & Whitney and international elevator brand Otis were especially strong. That's remarkable considering the market's fear of a double-dip recession and the U.S. Federal Reserve's "uncertain" status about the strength of the economy.
How to Profit From a Slowing U.S. Economy In the Second Half of 2010
As much as the architects of the U.S. stimulus might otherwise wish, it's becoming increasingly apparent that the U.S. economy won't be hot-rodding its way into a higher gear in the year's second half.
At best, the U.S. economy will chug along in low gear - managing only minimal overall growth, while bouncing over economic speed bumps that exist in more than a few key sectors. At worst, the engine of economic recovery will sputter, or stall completely - leaving Americans stranded alongside the fiscal roadside, or to roll backward into a double-dip recession.
At best, the U.S. economy will chug along in low gear - managing only minimal overall growth, while bouncing over economic speed bumps that exist in more than a few key sectors. At worst, the engine of economic recovery will sputter, or stall completely - leaving Americans stranded alongside the fiscal roadside, or to roll backward into a double-dip recession.
Is the U.S. Economy Destined for Deflation?
With inflation low and the recovery waning, a growing chorus of analysts is beginning to suspect that U.S. policymakers aren't doing enough to head off deflation.
U.S. producer prices fell for a third straight month in June, sliding 0.5%. That follows declines of 0.1% in May and 0.3% in April. Core inflation, which excludes food and energy costs, managed only a 0.1% increase for the month, and is up just 1.1% in the past 12 months. The U.S. Federal Reserve's preferred target for inflation is 2%.
Meanwhile a high rate of unemployment continues to jeopardize the U.S. recovery, and economists fear that a significant drop in economic growth could tip the scales toward a deflationary spiral.
U.S. producer prices fell for a third straight month in June, sliding 0.5%. That follows declines of 0.1% in May and 0.3% in April. Core inflation, which excludes food and energy costs, managed only a 0.1% increase for the month, and is up just 1.1% in the past 12 months. The U.S. Federal Reserve's preferred target for inflation is 2%.
Meanwhile a high rate of unemployment continues to jeopardize the U.S. recovery, and economists fear that a significant drop in economic growth could tip the scales toward a deflationary spiral.
The Global Double-Dip Recession: Which Markets to Hold... And Which Ones May Fold
Last week's stock-market meltdown was a worldwide affair, and was touched off by trader fears of a global "double-dip" recession.
However, the truth is that the odds of a recessionary reprise are high in just a few countries - primarily those that have experienced excessive fiscal and monetary "stimulus," or that have real inflation problems.
The rest of the world is recovering just fine.
However, the truth is that the odds of a recessionary reprise are high in just a few countries - primarily those that have experienced excessive fiscal and monetary "stimulus," or that have real inflation problems.
The rest of the world is recovering just fine.
To find out which markets to hold - and which ones may fold - please read on...
Government Spending Cutbacks Increase Odds of Double-Dip Recession
The odds of slower economic growth or even a double-dip recession are increasing as industrial countries, led by the United States & United Kingdom, embark on the most aggressive government spending cutbacks and tightening of fiscal policy in four decades.
As they reduce or eliminate stimulus programs installed in reaction to the Great Recession that began in December 2007, governments are gambling they can pare debt without strangling an economic recovery.
Nations will reduce their primary budget deficits, excluding interest payments, by 1.6 percentage points next year, the most since the Organization for Economic Cooperation and Development (OECD) began keeping records in 1970, according to JPMorgan Chase & Co. (NYSE: JPM) economists. The budget squeeze will lop 0.9 percentage point off growth in 2011.
As they reduce or eliminate stimulus programs installed in reaction to the Great Recession that began in December 2007, governments are gambling they can pare debt without strangling an economic recovery.
Nations will reduce their primary budget deficits, excluding interest payments, by 1.6 percentage points next year, the most since the Organization for Economic Cooperation and Development (OECD) began keeping records in 1970, according to JPMorgan Chase & Co. (NYSE: JPM) economists. The budget squeeze will lop 0.9 percentage point off growth in 2011.
History Shows Stock Market Plunge May Just Be Par for the Course
Although the stock market plunge last week was certainly unsettling, history and a slew of positive leading indicators show that this may just be part of a normal pattern with better news ahead.
Stocks were hammered on Tuesday as a negative revision to an economic report out of China and fears over European bank funding set off a global firestorm of selling. A very weak consumer confidence report didn't help matters.
The major U.S. stock indices fell through critical support levels, with the S&P 500 returning to levels first reached last August. That's almost an entire year of stock market appreciation out the window.
In the end, the Dow Jones Industrial Average lost 2.7%, the S&P 500 lost 3.1%, the NASDAQ lost 3.9%, and the Russell 2000 lost 4%. Large-cap stocks outside the United States fell 3.5%, while emerging market stocks fell 4%. Some of the European exchanges fell the most, including iShares MCSI Spain Index ETF (NYSE: EWP), down 5%, and iShares MCSI Switzerland Index Fund ETF (NYSE: EWL), down 6%.
Click here to see how the stock market plunge fits a historical pattern...
Stocks were hammered on Tuesday as a negative revision to an economic report out of China and fears over European bank funding set off a global firestorm of selling. A very weak consumer confidence report didn't help matters.
The major U.S. stock indices fell through critical support levels, with the S&P 500 returning to levels first reached last August. That's almost an entire year of stock market appreciation out the window.
In the end, the Dow Jones Industrial Average lost 2.7%, the S&P 500 lost 3.1%, the NASDAQ lost 3.9%, and the Russell 2000 lost 4%. Large-cap stocks outside the United States fell 3.5%, while emerging market stocks fell 4%. Some of the European exchanges fell the most, including iShares MCSI Spain Index ETF (NYSE: EWP), down 5%, and iShares MCSI Switzerland Index Fund ETF (NYSE: EWL), down 6%.
Click here to see how the stock market plunge fits a historical pattern...
Unemployment Report Shows Sluggish Recovery Will Take Years to Replace Jobs Lost in Great Recession
Unemployment figures released Friday confirmed that the U.S. economy is still recovering, but they also showed it will take years to replace the 8 million jobs lost during the Great Recession.
And until meaningful hiring takes place, consumers are unlikely to loosen their purse strings, the key to putting the economy back on track to full recovery.
Employment fell in June for the first time this year, reflecting a drop in federal census workers and a smaller-than-forecast gain in private hiring.
Payrolls declined by 125,000 as the government cut 225,000 temporary workers conducting the 2010 census, Labor Department figures in Washington showed. Economists projected a decline of 130,000, according to the median forecast in a Bloomberg News survey. Private employers added 83,000 to their payrolls.
And until meaningful hiring takes place, consumers are unlikely to loosen their purse strings, the key to putting the economy back on track to full recovery.
Employment fell in June for the first time this year, reflecting a drop in federal census workers and a smaller-than-forecast gain in private hiring.
Payrolls declined by 125,000 as the government cut 225,000 temporary workers conducting the 2010 census, Labor Department figures in Washington showed. Economists projected a decline of 130,000, according to the median forecast in a Bloomberg News survey. Private employers added 83,000 to their payrolls.
Misguided Policy Paving the Way for a Double-Dip Recession
With unemployment still hovering near 10%, policymakers should be doing all they can to combat joblessness and reinvigorate a recovery that is showing signs of weakness.
But they're not.
Instead, they're reeling in stimulus measures and enabling a double-dip recession, simply for the sake of fiscal austerity.
The Labor Department is expected to report today (Friday) that the unemployment rate held steady at 9.7% in June, or worse, edged up to 9.8%. That would follow yesterday's (Thursday's) disappointing report that showed new claims for jobless benefits jumped by 13,000 to a seasonally adjusted 472,000. The four-week moving average, which smoothes out volatility, rose by 3,250 to 466,500 - its highest level since March.
But they're not.
Instead, they're reeling in stimulus measures and enabling a double-dip recession, simply for the sake of fiscal austerity.
The Labor Department is expected to report today (Friday) that the unemployment rate held steady at 9.7% in June, or worse, edged up to 9.8%. That would follow yesterday's (Thursday's) disappointing report that showed new claims for jobless benefits jumped by 13,000 to a seasonally adjusted 472,000. The four-week moving average, which smoothes out volatility, rose by 3,250 to 466,500 - its highest level since March.
Slowing Factory Output Suggests Global Economic Recovery May be Weakening
A slowdown in manufacturing growth spread across the globe in June, as factory output fell in China, Europe and the United States, suggesting the global economic recovery may be losing steam.
But the overall level of factory activity continued to expand, suggesting that manufacturers may be experiencing a return to more normal rates of growth rather than heading for a contraction.
In China, manufacturing growth slowed more than economists had forecast, and a gauge of factory output in the 16-member euro region fell for the second consecutive month, two surveys showed.
But the overall level of factory activity continued to expand, suggesting that manufacturers may be experiencing a return to more normal rates of growth rather than heading for a contraction.
In China, manufacturing growth slowed more than economists had forecast, and a gauge of factory output in the 16-member euro region fell for the second consecutive month, two surveys showed.