At This Point, We're Not Even Trying To Hide The Magical Thinking Anymore

If your idea of financial prognostication is Jim Cramer, Laszlo Birinyi and the rest of the Happy Face Financial Media, then brother, have I found the economist for you!

When will this horrible recession be over? According to one surprising source, it's over right now.

The source is Robert J. Gordon, an acclaimed macroeconomist and professor at Northwestern University. It's surprising to learn he thinks the recession is over, because he is one of seven members of the elite Business Cycle Dating Committee of the National Bureau of Economic Analysis. These are the people who decide officially, for the record books, when recessions begin and end -- usually many months after the fact, when the decision is really obvious. I'm unaware of any previous case in which a member of this committee has stepped forward and declared the end of a recession in real time.

Gordon bases his gutsy call on an indicator that he says the committee never even looks at: claims for unemployment benefits. He's talking about the so-called jobless claims number that is released every Thursday morning before the market opens.

Based on detailed data from state agencies, it reports the number of workers who have asked for unemployment benefits in the previous week. As Gordon points out, there is no other major macroeconomic statistics that comes out so frequently and so close to real time.

According to Gordon's research, in every recession since 1974, the peak in jobless claims came within weeks of the bottom of the recession.

Wow. That's staggering. We're honestly saying that since we've hit a peak in weekly jobless claims six weeks ago, the recession is over.

That's the entire theory. The whole thing. Everything from here on out is recovery, just a slow, ugly one. All based on one statistic (and a traditionally lagging indicator at that.)

Does anyone still think this is just another recession, just like all the ones since 1974?

Second wave is coming, folks. It's a double dipper. Buckle up. Recoveries only happen when the fundamental problems are dealt with. Housing prices are still 30% too high. Millions of homeowners are going to get clobbered by falling home prices and ARM reajustments. The banks are still insolvent and are only still going because of billions of taxpayer dollars. $2 trillion in losses still remain for the sector. Commercial real estate is falling apart as I type this.

Just because you got lucky and landed on a ledge when you fell into the volcano doesn't mean it's not going to erupt and obliterate you.

The more I think about it, the more I'm coming up with the theory that the recovery addicts are saying to themselves "OK, I don't care what the data says. This recession has lasted sixteen freaking months now. It has to be over by now. What are the odds of this going any longer? Time to buy! Recession over!"

And that's their entire plan. It's like Cheney fiddling with intel to make the case for Iraq.