Time to Call It a Double Dip

I hate to say it, but this particular economic cycle may well include a double dip.

Yes, I realize that the government has projected a measly 2% growth rate for 2013—and that is assuming that Congress gets its act together to avoid tax-mageddon at the start of the year. (Here I would like to digress for a moment by wondering if these economists have been residing on Mars for the last three years to build that “if” into their assumptions but never mind).

Back to the double dip--I am not going to dispute projections of growth by trained and experienced economists; if they say 2% or even 1% is a fair estimate then I’ll drink that Kool-Aid and dutifully incorporate the number into reporting, presumptions about industries and sectors, and so on. Officially, growth is on the menu.

But I am going to argue that nothing about this “recovery” has been by the book and that the economy has been flailing around in recessionary muck even though it ended officially in June 2009 for one of either two reasons: either we never fully recovered and have been bumping along the bottom or the downturn was sharper and deeper than economic metrics captured and it is just taking this long to climb out.

This analysis is hardly original; there have been valid arguments put forth for both these points over the last two years.

At first I was in the we-experienced-the-mother-of-all-recessions-and-didn’t-realize-it camp, but now I am leaning towards we-have-been-bumping-along-the bottom-all-along theory. Worse, I am thinking that this bottom-feeding recovery is about to end.

One of the bright spots, as it were, in the economy has been the industrial sector. That was evidence by the return of manufacturing jobs--this when manufacturing was supposed to be dead--the never-ending growth of such companies like Caterpillar and other equipment manufacturers, and even in commercial real estate. Industrial REITs have done very well; so has the industrial sector.

That particular party appears to be over.  The Institute for Supply Management reported this week that U.S. manufacturing declined for the first time in nearly three years. The Purchasing Managers' Index, which came out in late June, had a similarly dismal report. Separate indicators that came out in recent days show that consumer confidence is at a low this year, but let’s face it—consumers have hardly been an engine of growth for the economy. Industrial, though, has and to see it slow is truly frightening now.