You think things are bad now
Ameriprise Financial's chief economist Dan Laufenberg stopped by the newspaper this week and gave his outlook for the economy.
It won't make you happy.
Laufenberg figures we're headed into a recession -- next year. Next year? It certainly feels like we're in one now. Companies are cutting back on staff and benefits. Money is tight and food and fuel prices keep going up. Next year?
Laufenberg says right now we're in an economic slowdown, and the tax rebates have helped keep the recession at bay. But once the recession hits, we'll know it.
It won't be like the last recession in 2001, which was so mild because inflation didn't kick up and bite us, he says. That recession was over over in about six months, shorter than the average recession which lasts 10 months, he says.
Laufenberg says the interest rate cuts by Federal Reserve policymakers is heating up inflation. He predicts inflation might rise to 5 percent, significantly higher than we've been used to for so many years. Inflation will affect the price of everything we buy, not just food and fuel, so the pain will be widespread. Laufenberg says the upcoming recession will feel more like the recession of the early 1990s.
That one helped sweep Bill Clinton into office with the unofficial slogan of "It's the economy, stupid."
Laufenberg also predicts the next recession could last up to twice as long as the the one in 2001, too.
One bright spot in his outlook:
If you want to do your own analysis on the economy, the statistic to look at is the Employment Situation report that comes out the first Friday of every month, he says.
The last report showed that May's unemployment rate jumped a half point to 5.5 percent, the biggest one-month increase in 22 years.
If the unemployment rate goes up even further in next month's report, Laufenberg says, then that would be a signal that we are in a recession now. If it improves, the recession will likely be ahead of us yet, he says.
We had nine recessions since the 1950s, and they can't be avoided, Laufenberg says. "Business cycles have not been repealed," he says.
If it's any consolation, at least the 2009 recession, assuming Laufenberg is right on the timing, will not be as bad as the one in the 1970s, when inflation reached around 12 or 13 percent.
(AP Photo)
