NBER Recognizes Recession

DOBBS: Well, actually the first person to declare recession was not associated with the NBER. It was actually Lakshman Achuthan, who joins us now.

Lakshman, you now have corroboration of your view, which of course, expressed here months and months ago.


DOBBS: Are you feeling comfortable now?

ACHUTHAN: Well, no, because we're in a recession. So not yet. I'd love to get out of this as well. But I do think that it's this recognition process that we are in recession...

DOBBS: Right.

ACHUTHAN: ... that sets the stage for recovery. We begin removing the excesses. And then, we can go forward again.

DOBBS: You know, as Kathleen was pointing out, I mean, one of the aspects of this industrial production and employment, we really didn't see the runoff in employment until the last of couple months here. What happened to that classic definition? Two quarters...

ACHUTHAN: Classic sequence. Of the two quarters? Well, I think, you know, you will get that. I think either you're going to see some rather significant revisions.

DOBBS: Right.

ACHUTHAN: Or we...

DOBBS: The government would revise these numbers?

ACHUTHAN: Yes, it happens.

DOBBS: Oh, my goodness!.

ACHUTHAN: Yes, and we could still have a little bit in front of us, too because we don't have definitive signs of that recovery just yet.

DOBBS: Well, just how bad is it? I mean, with Susan Lisovicz reporting on the malls here and the number of shoppers out there, Wal-mart having its biggest day ever, admittedly people are shopping for bargains, but good Lord, why not? This doesn't look that bad right now.

ACHUTHAN: The one piece -- there's a big piece that's just missing, that's not buying anything. And that's businesses. And they've been on strike for the better -- almost a year. So the consumer is carrying more than the normal load that they would carry.

Typically, the consumers pull back first in a recession and then businesses follow. This time, the sequence has been reversed. So everything does look a bit strange.

DOBBS: Would -- can we reasonably expect to see business demand, business investment come back in a reasonable amount of time, whatever that may be -- define what is reasonable?

ACHUTHAN: Yes, I think that's the challenge. We have excess some capacity from businesses. And either the capacity has to be reduced by taking it offline or maybe it's obsolete, or consumption has to rise. And the two of those things together may get us to a position where we can have a healthy recovery.

DOBBS: Give your best your best idea as to when that recovery would begin and what it would -- what would it look like?

ACHUTHAN: Well, I think...

DOBBS: A healthy recovery?

ACHUTHAN: A healthy recovery, you need to see some of that capacity being worked off.

DOBBS: Right.

ACHUTHAN: Because then businesses are back in the game.

DOBBS: Well, you know, as I look at some of these numbers, one of the things that a number of people have been talking about business inventories declining. And they have, but we're really not that far off January levels of last year in terms of inventories.

ACHUTHAN: Yes, the inventories are one thing. And those -- there has been corrections. And there may be a bounce in some production there, but the capacity to produce is still very large. Not only here, but abroad. And that has to come more into balance for that sustained 1990s type...

DOBBS: How about job security? The people are going to lose their jobs here. Do you have a sense of what the unemployment rate is going to look like, the number of people who are going to lose their jobs here?

ACHUTHAN: You've got minimally a few more months, at least a quarter more of rising unemployment in front of you. So that's not good news. And we do...

DOBBS: What about interest rates? People depending upon those CDs, those interest rates, they're on fixed incomes.

ACHUTHAN: Those are likely to remain low. Interest rates are likely to remain low, because I think that the recovery has some challenges to it. And it hurts not only individuals. It hurts companies, as they try to get profits.

DOBBS: And should we look to the equities markets to give us a driver here within this economy, to start seeing the wealth effect, at least some percentage of what we got...

ACHUTHAN: If they can hold what they've done here, that would be good. Then you'd have a positive wealth effect.

DOBBS: All right. As always, good to have you here.

ACHUTHAN: Thank you.

DOBBS: Thanks.