A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.



Recovery is Here

LOU DOBBS: Lakshman Achuthan, regular MONEYLINE guest is here, to reinforce his view that the recovery is real.


DOBBS: That recovery is here.

ACHUTHAN: Recovery is here, and the reason that I can say that is because within the group of economists, there's this small set called business cycle economists, and we forecast...

DOBBS: The elite.

ACHUTHAN: ... recessions and recoveries.

DOBBS: The elite.

ACHUTHAN: Well, we focus on turning points, and we tend to get those right. And, we got the recession right.

DOBBS: Absolutely.

ACHUTHAN: And we're getting the recovery right with a mirror image of what the indicators are doing. They're rising in a pronounced, pervasive, and persistent way. The timing of this recovery -

DOBBS: I want to hear that again, pervasive, persistent?

ACHUTHAN: And pronounced.

DOBBS: And pronounced.

ACHUTHAN: Repeats.

DOBBS: I like that.

ACHUTHAN: All right. And it's going to be in the first quarter. The recession will end sometime in this first quarter. I would agree with the tone of the chairman's discussions, where there's concern about the strength of the recovery. It could be challenged.

DOBBS: In other words, a double dip?

ACHUTHAN: I wouldn't go that far. I would say that a double dip...

DOBBS: You're more cautious than Alan Greenspan?

ACHUTHAN: Oh, no. I'm probably more optimistic in that sense, that we're not going to have a return to negative growth.

DOBBS: Right.

ACHUTHAN: It will be a gentle recovery, but I don't see a return to negative growth after the rebound begins.

DOBBS: Unemployment, you just heard Glenn Hubbard, the President's Chief Economist say that he believed that we were right at the top in terms of the unemployment problem, in terms of the rate. Do you agree?

ACHUTHAN: Probably optimistic there. Those - the unemployment rate tends to rise, even though the recovery begins, and the gentler the recovery, the softer the slope of the recovery, the more it's likely to rise. And this is probably...

DOBBS: Do we need economic stimulus?

ACHUTHAN: You probably need some sensitivity to the unemployment problem. I think workers are still going to be under pressure.

DOBBS: And that is precisely Glenn Hubbard's point is, as you I think heard him say. And in terms of the rest of the year, what can we expect in the way of growth since we have now moved to recovery? Are we talking about a quick run to five percent?

ACHUTHAN: No, decidedly not. This is not a V-shaped recovery. Japan and Germany, the second and third largest economies in the world are in recession, so our international trade side is not going to help us very much. It's a homegrown recovery.

Businesses, business profits still under pressure, so they're not eager to spend too much right now. A lot of it has fallen on the backs of the consumer, with the help of lower interest rates.

DOBBS: Is the consumer going to be able to stay in this economy. He and she have been taxed in terms of debt. They have been taxed in terms of staying power throughout this recession.

ACHUTHAN: I think they stay in here. That's why we have the recovery. But I don't think they can step it up in a surprising fashion here.

DOBBS: So you don't want to give me a growth rate for 2002?

ACHUTHAN: It will be - when we look back, it will be a gentle year, a gentle recovery.

DOBBS: That's a non-numeric response.


DOBBS: I appreciate it. Thanks.

ACHUTHAN: OK, thank you.