Predicting the economy is a lot like reading tea leaves - but a lot less certain. Indeed, economist Edgar Fiedler famously said "Ask five economists and you'll get five different answers - six if one went to Harvard."
Still, the economists at the ECRI (Economic Cycles Research Institute) are darn smart and have a pretty good track record, so perhaps there's truly something to their latest prediction: the economy is turning around and the recession will soon be over.
NPR's All Things Considered has the scoop:
"The reason we're so convinced — and we are quite convinced — that the recession is drawing to a close is because of leading indicators," Lakshman Achuthan, managing director at the institute, tells NPR's Guy Raz.
The ECRI categorizes indicators, like unemployment rates and productivity, as leading, lagging or coinciding with the business cycle. A lagging indicator would be the unemployment rate. Leading indicators include "drivers of the economy," such as housing activity, productivity, money growth and credit.
Different sequences of indicators point to different types of events. Achuthan says the ECRI sees a robust sequence of events that happen at the beginning and end of recessions, and indicators are showing it is likely that there will be a recovery soon.
"The key is that there is no one piece that we're hanging our hat on. It is a pervasive upturn in these leading indicators, and that is the hallmark of something that is going to persist for a few quarters, a year at least," Achuthan says. "And it is going to be pronounced."
Achuthan says that when you add up all the indicators without bias into a leading index, the picture becomes clear: These indexes are shooting up. And that says a lot. In the time that these indicators have been in existence, they have not made a mistake on a recession or a recovery poll, he says.
What do you think? Will the economy recover soon or are you pessimistic?