The U.S. economy is taking a cyclical turn toward a "pronounced, pervasive and persistent" downturn that has already hit industrial manufacturing and will spread over the next few months, says Lakshman Achuthan, the co-founder of the Economic Cycle Research Institute.
Key indicators of long-term economic growth are pointing downward, Achuthan told The Wall Street Journal in a bleak assessment more pessimistic than the so-called soft patch some economic experts have described.
The JOC-ECRI Industrial Price Index, published weekly in The Journal of Commerce, is pointing to a slowing economy, with the measure of prices for a mixed group of raw industrial commodities down nearly seven points from its mid-April high point.
“We’re talking about a cyclical turn that’s pronounced, pervasive and persistent, not a one- or two-month affair,” Achuthan said. He added the slowdown is likely to last a couple of quarters at least — even as he stopped short of calling it a formal recession, which generally is defined by two quarters of economic contraction.
“This isn’t a story about one country driving [growth] down: China didn’t do this, and the U.S. didn’t do this,” he said. “It’s very big … and not something you can deny.”
“The broad economy is going to slow alongside the industrial sector starting in the middle of this year, so in that sense it may feel like last year,” Achuthan said. He said closely watched gauges of economic growth will begin slowing at the same time. “It’s all going to be synchronized," he said.
Achuthan said ECRI's longer-term leading indicators began to soften even before even before Japan’s nuclear disaster and turmoil in the Middle East roiled the global economy. Some of those factors may have led to a more pronounced pullback in global growth, he said, which may lead to a temporary rebound.
He said high U.S. unemployment, currently at 9.1 percent, is unlikely to show an appreciable decline soon. ECRI sees jobs growth as “slower” in coming months, Achuthan said.
“You’re not going to see the quarter of a million jobs [created] on average anytime soon,” he said, referring to the figure of employment growth that many analysts cite as a benchmark for sufficient growth in employment. “We’re going to get back into that 100 plus or minus range through the summer.”