America has fallen into a recession as severe as 2008

Spark Global Limited reports:

Leading economists have warned that the US is already in a recession that could be as severe as the financial crisis of 2008, based on key consumer data.

David Blanchflower, a professor at Dartmouth College, and Alex Bryson, of University College London, report in a joint paper that the University of Michigan’s (UM) and The Conference Board’s (CB) index of consumer expectations, Both fell more than 10 points to make accurate predictions.

The indexes are based on average Americans’ income expectations, employment conditions and their expectations for the U.S. economy in the near term.

The CB Consumer confidence index fell 25.3 points in 2021, while UM dropped 18.4 points, the data showed. That compares with declines of 19 and 21 points, respectively, before the 2008 global financial crisis.

On this basis, the authors argue, there is a good chance that the US will enter recession by the end of 2021.

According to the authors of Blanchflower, who served on the Bank of England’s monetary policy committee from 2006 to 2009, these indicators are crucial to understanding the state of the economy because they provide real-time information about what is happening.

They point out that it would lag if judged by other data, such as GDP growth, which lags by nearly a year, and unemployment, which is distorted by furloughs.

According to the paper, the economic situation in 2021 is exceptional because the US government’s unprecedented direct intervention in the labor market has led to a rapid recovery in employment and unemployment from the sharp decline in 2020.

But over the past six months, there has been a significant decline in consumer confidence from the 10-point baseline rule of thumb, which the authors say means the U.S. economy is now entering a recession.

The paper stresses that fears associated with the outbreak persist and continue to hamper economic growth, exacerbated by the Delta variant.