Democratic Underground

Depression Watch #1:  Brother Can You Spare Some Confidence?
December 1, 2001
by Jerald Cumbus (JCMach1)

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I know everyone will be completely shocked by what I am about to say, but here it goes anyway.  The U.S. is in a Recession -- there I said it.  That was the official news from the National Bureau of Economic Research on Monday.  This group, the officiator of recessions since the 1930's, also officially set the beginning of the recession as March 2001.  The most important indicator, in their interpretation, was that March 2001 was the high-water mark for employment in the last business cycle.  The attacks of September 11th have merely served to hasten the decline according to the group.

While this is bad news, it is something that most people who follow the economy have been expecting for months.  The second round of bad news this week was far more disconcerting.  According to the Conference Board, consumer confidence has fallen for the fifth straight month (down to 82.2).  Additionally, the seemingly higher number for October was revised down to 85.3.  While it is clear that the September 11 attacks were affecting this statistic as well, it was clearly heading downward long before the World Trade Center.  Consumer confidence is the psychology that underlies the economy.  No propaganda can change these fundamentals.  As long as people are afraid they may lose their job, are worried about their debt load, and concerned about America's  place in the world chances are the confidence level will continue to drop.  The silver lining is that this indicator is only at a 7 year low.  However, the real danger is that scared consumers abandon retailers this Holiday Season.

Up to this point the Bush Tax Cuts and other stimulus have had little to no effect on the US economy.  None of the numbers seem to be supporting this.  If anything, the undermining of the Federal Government's fiscal solvency causes more uncertainty in consumers and the markets.

Now I am depressed.

Depression Watch is a continuing series that will explore the numbers, politics, and realities of the US Economy.  Why a Depression Watch?  We are in a Recession -- there is only one thing worse than that.  We here at Depression Watch will keep you informed on this important issue that affects your pocketbook.