Hoisington Management Fourth Quarter Review for 2011

Economists Van Hoisington and Lacy Hunt of Hoisington Management released their fourth quarter review for 2011, reaffirming their call for the development of a recession in the US in 2012. The report provides an excellent overview of our current economic situation and should be read in its entirety. However, the following paragraph provides a concise summary of their outlook.

The actualization of a recession in 2012 will be especially difficult for the average American in that we have not really recovered from the previous recession ending in 2009. This obviously is not a typical business cycle; rather, we may be in the midst of what Harvard historian Niall Ferguson titled a “slight depression.” The reason for this analysis is that real personal income less transfer payments, one of the four coincident indicators the NBER uses to determine recessions, has recovered off its recessionary low in 2009, but is still about a half trillion dollars below where it was in 2008. Industrial production is still off 5% from its peak and no higher than in 2005. Full time employment is at the same level as in May 2000, despite a 28 million person increase in population and a 11.4 million rise in the labor force. Real median income stood at $51,800 in 2007, but for the first time ever has declined in this recovery and now stands at an estimated $49,400, a 6.4% drop from the previous peak. These statistics painfully point out the adjustment process in an overleveraged economy.

The primary problem remains excessive debt, both public and private, which will constrain economic growth during the next several years as the gradual deleveraging process continues.