If you have a job and it is not in jeopardy, pull out the party hats and toot your horns. The OECD calls an end to the global recession.



The global downturn was effectively declared over yesterday, with the Organisation for Economic Co-operation and Development (OECD) revealing that "clear signs of recovery are now visible" in all seven of the leading Western economies, as well as in each of the key "Bric" nations.



The OECD's composite leading indicators suggest that activity is now improving in all of the world's most significant 11 economies – the leading seven, consisting of the US, UK, Germany, Italy, France, Canada and Japan, and the Bric nations of Brazil, Russia, India and China – and in almost every case at a faster pace than previously.



Each of the 11 economies saw an improvement in July, the OECD said, with only France improving at a slower rate than in June. The July figures are the most encouraging since the indices began ticking downwards during the first quarter of last year.



The OECD's leading indicators are considered a key economic yardstick because they measure the sectors of countries' economies that tend to react first to upswings and downturns. As such they provide early evidence of the way in which the overall economy is progressing.

Unemployment Likely To Rise For A Year

"It takes GDP growth of about 2.5 percent to keep the jobless rate constant. But the Fed expects growth of only about 1 percent in the last six months of the year. So that's not enough to bring down the unemployment rate."

False Threat of a Double Dip

Michael Dueker is Head Economist for North America at Russell Investments and a member of the Blue Chip forecasting panel. In February of 2008 he warned Econbrowser readers that it appeared unlikely that the economy was going to escape the slowdown without a recession. In December of 2008, he predicted in this forum that the recession would last until July or August of 2009, but that employment growth would not resume until March of 2010.



With that track record, we were very interested to learn the latest macroeconomic predictions stemming from Russell's Business Cycle Index, subject to the disclaimer that the content does not constitute investment advice or projections of the stock market or any specific investment.

Model Predictions

Projections On Payroll Employment

Modeling the Double Dip

One key point of discussion at present is whether the economy faces a danger of sliding back into recession for the second part of a double-dip recession. The business cycle index and its accompanying payroll employment forecasts can help assess the risk of a double-dip recession. The chart of the business cycle index below illustrates that some backsliding in business cycle conditions is projected early in 2010.



Business Cycle Index Shows Recession Is Over







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Model-Based Recession Probabilities



To see if the projected backsliding in business cycle conditions in early 2010 represents a serious threat of a double-dip recession, we can look at the forecasted recession probabilities for future months. The chart below shows that the recession probabilities do not reach the threshold between 40 and 50 percent where we would call a double-dip recession.







click on chart for sharper



Current Jobs Forecast

The current employment forecast shows some promising job gains between October and December 2009 and then some backsliding, with a small negative forecast for March 2010. If this occurs, there will be discussion about the possibility of a double-dip recession, although that is not the scenario projected here. Instead of a double-dip recession, the forecast presented here is one where it takes a long time for the economy to achieve consistent triple-digit job gains, which are not expected until 2011.







click on chart for sharper image

Paul Kasriel On The Double-Dip Theory

Over 50 years of history suggests that the economy does not enter a recession unless the Fed pushes it into one.

Krugman vs. Kasriel

Unemployment in the United States will peak only in early 2011 because of a slow and painful recovery from the global economic crisis, Nobel Prize-winning economist Paul Krugman said on Wednesday.



He said the global economy seems to be stabilizing at a level that is "unacceptably poor" and added it is possible that the recession will be a double-dip one.



Krugman, who received a Nobel Prize for economics in 2008, said the acute phase of the global crisis had passed but the recovery is likely to feel like a "continuing recession."



He said recoveries have been weak from past crises in the United States and other regions as job sectors continued to get worse long after the crises have bottomed out, adding the global job market will continue to get worse "well into 2011."



"We might have a double dip, that's a real possibility now for the world as a whole," said Krugman, saying the effects of stimulus programs will start to fade early next year and recovery will be slow due to the global nature of the crisis.

Job Loss Recovery







The last three recessions are unlike the eight preceding recessions. For numerous reasons described below we are heading for another job loss recovery. ...

"recovery is likely to feel like a continuing recession."