And Effect

While there is a lot of chatter about how wrong economists (as if economists were some sort of collective intelligence) were about recession predictions, there are a fair number of people who believe that the United States is, in fact, in a recession. And they could be right; after all, the beginning of a recession is always declared after the fact.

And one could be forgiven for thinking that a recession is still in the cards for the near future, given the steady trickle of news about layoffs in company after company. I've spent a decent amount of time on LinkedIn recently, and my feed has been something of a downer recently. There have been a number of notifications of layoffs (and even company closings) recently. To be sure, there have also been people celebrating their new roles, but those are individual events, and they don't manage to balance the news of groups of people losing their jobs. I wondered what this would mean for confidence numbers, so I hopped over to The Conference Board's website, and, sure enough, Consumer Confidence in the United States is down by 1.7 points.

I'm curious as to the degree that this is a self-fulfilling prophecy. Because sometimes, there's no better way to be ahead of an event than to be part of its cause. One company's employees are another company's customers, and each round of layoffs makes other companies that rely on the public's discretionary income think that maybe they should start cutting production, costs or both, in order to not be caught flat-footed when demand takes a dive. And the snowball simply grows from there.

To be fair to businesses, they're simply following their incentives. After all, they have a responsibility to look after their stockholders' investments, and no real responsibility to the public at large, or their employees; at least not in the same way. And positioning themselves for a recession that doesn't come is considered more responsible than not being prepared for one that does. And labor costs are seen as something to be done away with, rather than a necessity for the economy at large to function.

It's also worth pointing out that government has it's own part to play in all of this. The United States government, being unwilling to tailor either spending or taxation to prevailing economic conditions, is unable to respond to those conditions without creating more problems down the road. Although, given that the United States does have a representative government, most of the blame for this can be laid at the feet of various constituencies, especially those that have the wherewithal to fund campaigns, and those that prefer to be the passive audiences of those campaigns, rather than seeking out information themselves. (Representative governments punish the non-participatory, regardless of the reasons for non-participation.)

In any event, there seem to be a lot of forces conspiring to ensure that a recession occurs late, rather than never. The business community is simply more open about its plans.