The Shape of the Recession

Options include(from least to most grim):  V, U, W, WW, L.  Wait, maybe that last one really ought to be |________.   From Mish Shedlock’s Global Economic Trend Analysis:

The global slowdown – already evident in second-quarter data for 2010 – will accelerate in the second half of the year. Fiscal stimulus will disappear as austerity programs take hold in most countries. Inventory adjustments, which boosted growth for a few quarters, will run their course. The effects of tax policies that stole demand from the future – such as incentives for buyers of cars and homes – will diminish as programs expire. Labor-market conditions remain weak, with little job creation and a spreading sense of malaise among consumers….Avoiding double dip [or W] recession will be difficult….Fasten your seat belts for a very bumpy ride.

Shedlock himself is even less optimistic, noting that an L-shaped recession is indeed possible:

More likely to me is something like an “L” or a “WW” kind of scenario with the U.S. slipping in and out of recession for a prolonged period of time, perhaps 3-4 years or more….

If the Fed and Congress drag this out, which at this point seems likely, we will see a severe “L” or “WW” shaped recession playing out over several (or more) years.

It’s a fairly dire picture, to say the least.  Read more of Shedlock’s reasoning behind his prediction here.

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