That '70s Show Rerun?

The question has certainly shifted from "whether we are in a recession" to "how long and how deep it will be." The typical recession lasts 18 months, as calculated by the National Bureau of Economic Research and presented in the Merrill chart below.

Even though we are thus a year into this one, many folks still think we have much further to go.

Even the Treasury Secretary, the Administration's chief economic spokesman, conceded that the recession 'probably' (he could well have said certainly) will be the longest that the nation has suffered since World War II.... Though the economy has been drifting down all year, the slide has been so gentle for so long that the Administration felt it possible to deny that the nation was in a recession at all. Recently, the Commerce Secretary asserted that the economy was only going through a period of 'sideways waffling.' Now, though, the slide has suddenly become something more like a nosedive -- by some measures, the worst since the 1930s.

A crucial element is consumer confidence, which is pretty lousy right now.

The current recession has also shown a greater capacity to frighten the public than any of the previous postwar downturns. The next report of the University of Michigan's respected Survey of Consumer Confidence will show the deepest pessimism about the economy since the survey began in 1946. The business-financed Conference Board, which polls 10,000 households on the economy every two months, also finds consumer confidence at an all-time low; its "confidence index" plummeted 30% in September-October alone.

The key element in reviving confidence will be employment, which is a) not going in the right direction; and, b) in some respects, is worse than we've seen in ages, using more historically comparable numbers.

It's hard to make a bullish case for the economy right now, even with the big Fed "cut."