Federal Reserve Board chairman Alan Greenspan
Does NASDAQ's four-session sweep of an aberrant-feeling short trading week — the first such string of four "up" days since August of last year, and one that took the tech index up 14 percent, its second biggest one-week gain ever — mean anything whatsoever?
After a precipitous fall slowdown and a jittery winter trough, are consumers — who have doggedly continued spending through all of it — finally ready to pack it in and usher us into a recession?
Dobbs, himself a dot-com survivor who returns to the AOLTW compound (parent empire of this writer) and his CNN "Moneyline" fiefdom a day before the Fed meets again May 15, may have smelled it in the wind: The presidential selection is long gone. The China staredown couldn't last. Bush is willfully boring. The cable-news "crisis" junkies need another fix, and maybe here's one that's just about ready for amping up.
Suggested chiron: Recession Watch.
The numbers, in case you're just joining us, went sour again Thursday. First-time unemployment claims are creeping up to recessionary levels. Retail sales are finally starting to fall off, taking retailers (even Wal-Mart) down with them. And after hope-spreading March upticks in both the consumer-confidence gauges of the day — from the Conference Board and the University of Michigan — Michigan's mid-month number put the 2001 trend back in a distinctly southerly direction.
We knew manufacturing was already in a recession, still waiting to get rid of old inventories (some good news there Friday). We knew business investment was moribund, and Wall Street has been ringing the alarm bells for what seems like forever. But back in March, with unemployment holding at 4.2 percent and the confidence numbers looking like they'd hit bottom and bounced, it seemed possible that the American shopper — who accounts for two thirds of U.S. economic activity and definitely saved our butts in 1997 and 1998 — was going to ignore his incredible shrinking portfolio and drag us through again. And why wouldn't he?
Suddenly, this thing is getting harder to call than the Florida recount, not least because recessions are notoriously hard to spot from the inside. But if we're not in one now — and considering that first-quarter growth will likely be found to be moribund but not contractionary, few economists are making that call — we definitely seem to be back on the brink.
This cable-channel "crisis," if it catches on, will be a numbers game too, but to get the narrative structure it's best to know your capital letters: The "V" (sharp slowdown, sharp rebound) looks pretty much out of the question at this point. The "U" (slowdown, trough, leisurely turnaround) is always a good bet if you're trying to sound smart, as is its close cousin the "W," which is basically a "U" with a blip in the middle that may turn out to have been March. For doomsayers, there's the dreaded "L" — sharp slowdown, after which we all eat roots and berries until well into 2002.
And then there's the "G." As Wall Street, Main Street and Congress all savor a holiday from their troubles this three-day weekend, the ghost of Alan Greenspan is stirring again. Since the Fed chairman galloped onto the scene in January with a 50-point intra-meeting rate cut and followed it with two more of the same, the markets have managed to make his spring hat trick — the most aggressive rate-cutting of his 14-year tenure — look like negligence.
The argument for dynamiting Greenspan's statue goes like this: He blew the "soft landing" in November and December, showed up too late in January, and left the markets by the curb to die in March. Now he's waited too long to act on Wall Street's warnings about NASDAQ being the best leading economic indicator we've got. He's been standing by, listening for consumers' cry for help, and now that they've started wailing, maybe it's too late.
But don't dump your Greenspan futures just yet. As the governors on the FOMC confuse the markets by alternately declaring that the economy is fine and that they'll be vigilant to end the slowdown, King Alan has been even more silent than usual. But if he was waiting for wallets to start closing, he may not need to wait any longer. Now that Thursday's PPI number — complete with falling energy prices — and a clearly softening labor market have publicly removed the threat of inflation from his calculations, fingers will soon begin to point to an inter-meeting cut some time between now and the May 15 meeting. If he rides in again, and we pull out by year's end, he'll be remembered for it.
Speaking of remembering, does anybody out there recall what a real recession looks like? The elder Bush's bout with the economic blues cost him reelection, but as recessions went it was mostly statistical. The last real one was a one-two punch that lasted almost three years, from January 1980 to July 1981 and again from July 1981 to November 1982, the latter digging deeper, contraction-wise and unemployment-wise, than anything since the Great Depression.
Oil prices, stagflation and the inflation-breaking campaign of Carter-Reagan Fed chairman Paul Volcker did that one, and Volcker's zeal — the prime rate, at one point, was a usurious 21.5 percent — has been vindicated by history. Chalk up George Bush's pothole to the Gulf War. Our current scare quite obviously has something to do with the bursting of the tech bubble, and more broadly with the mean old business cycle and the inevitable end of any long run of luck. Maybe Greenspan's instincts have deserted him, or maybe he just works in mysterious ways. Maybe there was nothing anybody could do.
And maybe this scare will be a blip too, whether the recession actually happens or not. Ever since that Clinton fellow started holding a constitutional crisis every two years, Americans have learned to like their sturm with extra helpings of media drang, and after 10 years of good times and two years (really only one) of free money and teenage millionaires, we may have this next "crisis" out of conscience, if only to punish CNBC for letting the bubble turn them into cheerleaders.
Lou Dobbs, avenging economic angel?