Looks like we are already in a recession

Almost always, the government is a quarter or two late in telling us we are in a recession. In part that’s because government spinmeisters always put the best possible spin on current statistics, only to revise them downward later on. For example, the following headlines from John Williams’s “ShadowStats” are typical of the government spin. It seems as though people don’t pay attention to historically revised numbers to the downside. Attention span being as short as it is, few people look under the hood to look for truth. So the government continues to spin to its own propaganda advantage.

• June Payroll Gain of 223,000 Was Just 163,000, Net of a Downside Revision of 60,000 Jobs to Overstated May Payrolls

• June Payrolls (Number of Jobs, Not People with Jobs) Rose by 223,000, But Number of People with Full-Time Employment Dropped by 349,000

• Bad News Drop in Unemployment from 5.5% to 5.3% Reflected 375,000 Unemployed Disappearing from the Labor Force, Instead of Finding Gainful Employment

So rather than relying on the government to tell us we are in a recession, I like to look at what is really happening in the economy as opposed to the smoke and mirrors reports put out by our government. Here are a few charts that suggest the next downturn may already be underway.

Year over Year Factor Orders
True manufacturing is of less importance now than in the past because most of this national wealth-creating sector has been chased offshore by American bankers and their self-serving so-called free trade agreements. But even in recent history, when manufacturing goes negative it likely means we are in a recession, as the chart above shows. Indeed first quarter GDP was just a whisker above zero and chances are it will be revised downward into negative territory in the not-too-distant future. A “recession” is defined as two successive quarters of negative GDP. Of course the mainstream media would have you believe the chances that we are already in a recession are considered slim to none. The chart above as well as those below suggest otherwise.


WTICThe value of manufacturers’ new orders for consumer goods industry is down sharply and, as the chart upper left suggests, the picture is looking reminiscent of the 2008-09 recession.

If new orders for manufacturing are down, there is a good reason for it. Inventory is piling up because sales are decreasing. That obviously requires companies to cut back on production which in turn will result in a worsening of the employment picture. Evidence of this slowdown also comes from a plummeting oil price as pictured in the chart above. Notice how oil prices have remained near their bottoms after the sudden plunge earlier this year. If the global economy were as good as claimed, how do you explain all of these weak charts as well as the buildup of inventory in the chart above?

One thing we know for sure is that volatility in various sectors of the world economy is growing dramatically, as are interest rates in European sovereign debt markets. Check out the 10-year yield chart on your left for sovereign German debt. Remarkably, this is taking place just as the European Union is supposed to be engaging in QE. The same or greater rate increases have occurred through the weaker European economies as well. This move out of bonds is not happening because a booming economy is bidding those resources toward more productive use. Rather, it is happening because after so many years of promises from central bankers, it is becoming increasingly clear that Keynesian policies are a failure. I believe what we are seeing is a flow out of sovereign debt markets (e.g. the German Govt. 10-year bonds above) either into other sources of cash or real estate or stocks. Meanwhile, Chinese stocks are in the midst of a major decline that has Wall Street increasingly concerned. And Wall St. stocks, which have been boosted to a great extent by money created out of thin air, are becoming ever shakier, as evidenced by among other indicators, a second Hindenburg Omen, which simply measures extremes of new highs and new lows at a given time. This bipolar condition in the market is evidence of growing instability. And as Dr. Robert McHugh notes, all major stock market crashes since 1929 have been preceded by Hindenburg Omens. Hindenburg Omens do not guarantee a stock market crash but they appear to be a necessary condition for that event. For now there are two on the clock that will last through the very dangerous month of October.

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.