Taps Coogan – October 10th, 2020

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Lakshman Achuthan of the Economic Cycle Research Institute recently spoke with Jim Grant of Grant’s Interest Rate Observer about the progression of the Covid recession. Mr. Achuthan notes that, from a business cycle standpoint, the recession is likely already over and that the National Bureau of Economic Research’s dating committee, which retroactively assigns the ‘official’ beginning and end dates to recessions, will probably end up determining that the current recession ended sometime before October.

To be clear, he is not claiming that things are back to normal, or that things are not still getting worse for many people. The demarcation of the end of a recession simply means that the economy has returned to a growth trend, holistically speaking. Considering that third quarter GDP estimates are pointing towards a rebound in the ballpark of 35%, it’s probably the case. He also notes that inflationary pressures are rising and that once we get through the first few quarters of recovery, structural trends and the damage to small businesses and the labor market may skew the outlook to the downside.

Some excerpts from Mr. Achuthan:

“You’re not going to get anything official for a while but… I am telling you that the recession is over. We’re in a recovery. That’s what the cycle indicators are saying. It’s really grounded in the industrial sector of the economy… Not unlike past recessions, the early going of the recovery, it has a little bit of a ‘V shape’ because you’re coming off of…, in this case, very extreme lows.”

“The early stage of a recovery is always a ‘V,’ but once you get a few quarters into it, or maybe a year at most, after that the cycle owes you nothing and you are going to go back to whatever the big structural patterns were and unfortunately, those were kind of easing to the downside and there’s no good reason why that’s changed…”

Enjoy the full discussion above.

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