Real quick: Here’s why a recession seems unfathomable right now.

With each bullet point we highlight the key word.

1. Consumer credit is booming.

2. Housing starts are on the rise.

3. Vehicle sales are on the rise.

4. Jobs growth is accelerating.

So you’ve got: cars, jobs, houses, credit.

‘Nuff said.

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Women in Debt, which offers female-focused debt advice, has warned that the number of UK women facing serious debt has grown significantly over recent years.

The organisation believes that more women will need advice on solving debt problems in the future because they are building up an unsustainable level of indebtedness.

Women in Debt’s director, Georgina Earle, said: “Females have fought for equality over the last decade or so … We have wanted independence from our spouses and to be able to afford a lifestyle based on this equality.”

However, in their efforts to achieve equality, many women have taken on debts they can’t afford, she warns, and the economic decline in recent years has made the situation worse.

“More females have been able to secure credit based on better jobs [and] higher salaries … However the past few years have seen a huge change and I believe that women will fare the worst,” Ms Earle said.

Labour MP and anti-debt campaigner Stella Creasy recently warned that women are being targeted by payday loan companies.

There has been a rapid increase in the number of payday lenders operating in the UK in recent years as household incomes have been squeezed by the recession.

Payday loan companies offer instant loans of small amounts for a short period, typically around a month.

If the loan is paid off in full at the end of the term there usually isn’t a problem, but rolling over a loan to the following month can quickly cause difficulties because of the extremely high interest rates charged by payday lenders.

Payday loan companies have set up websites targeting women and are advertising on television programmes such as Glee and Friends.

Ms Creasy said women are being taken in by payday lenders.

“Because they are working and have a regular income they are able to pay back at least some of the loan. But if they can’t make a payment they make money for the firm through paying penalties and extensions,” she commented.

At the end of last year accountancy firm RSM Tenon reported that women account for nearly half of all insolvencies, while in the 1980s it was very rare for women to become bankrupt.

The bank of England is expected to launch another round of quantitative easing (QE) this week, in the hope of preventing the UK falling into another recession, after the economy contracted by 0.2 per cent at the end of last year.

The bank is likely to pump at least £50 billion into the economy by purchasing government gilts from pension funds and insurers with electronically created money.

This round of QE, which is designed to bring down borrowing costs, follows a £75 billion injection into the economy last October.

Since the QE programme started in March 2009, the Bank has bought £275 billion in gilts.

A final decision on the latest round of QE will be made at this week’s Monetary Policy Committee (MPC) meeting.

Some economists believe that last week’s welcome news that the UK’s manufacturing and services sector has grown to its highest level for ten months may lead the MPC to review the scale of the latest round of QE.

Last week The National Institute of Economic and Social Research (Niesr) called for the government to ease back on spending cuts in order to encourage the economy to grow.

The think tank warned that the UK economy will enter recession in the first half of 2012 if households continue to cut back on their spending.

Niesr forecasts that the economy will shrink 0.1% in 2012, however if the eurozone debt crisis is resolved the UK economy could grow 2.3% in 2013, it said.

“We forecast a return to technical recession in the first half of this year, as households continue to retrench, credit conditions remain tight, and businesses are reluctant to invest given uncertainty about both domestic and foreign demand,” the think tank said in its UK and World Economy Forecast.

Fund manager John Hussman has been taking a fair amount of flack for his recession prediction, which in light of the latest data, does not seem likely (via PragCap).

But nonetheless, he’s sticking with it, and sticking with his calls for a big market plunge.

…we’ve seen a few suggestions that because the latest Purchasing Managers Index came in above 54 (the January figure was 54.1) and the S&P 500 is now above where it was 6 months ago, any concern about a recession is now invalidated as two of the four components of our basic Recession Warning Composite (see Expecting A Recession ) are no longer active. Put simply, this is not how this particular “Aunt Minnie” works. At least one signal from the Recession Warning Composite has appeared either just before or during each of the past 8 recessions, without false signals (the PMI never hit that 54 level in 2010), but those signals are typically not “step” impulses that stay continuously active. Rather, the appearance of even one composite signal is, in and of itself, cause for some recession concern. But given the simplicity of the Recession Warning Composite, a much broader set of evidence is clearly preferable, much of which has been the subject of numerous recent weekly comments.

As it happens, I received identical criticism of my recession concerns in May 2008, when the S&P 500 briefly rose above its level of 6 months earlier, and credit spreads briefly retreated from their levels of 6 months earlier, leading to suggestions that even our own recession evidence had “turned.” At the time, the Fed was easing, Congress had passed an economic “stimulus” in the form of tax rebates, economic reports were coming in tepid but ahead of expectations, and any concern about recession was viewed with disdain. The S&P 500 had advanced about 12% over a period of about 10 weeks, and was only about 8% below its 2007 peak, having recovered much of what was (in hindsight) the initial bear market selloff. This was the most recent example of the “exhaustion syndrome” that emerged again last week (see Warning: Goat Rodeo ).

At the highs of that May 2008 advance, I observed “The reality is that as recessions develop (and I continue to believe the U.S. faces a much more significant downturn than we’ve observed to date), the data can take months to accumulate to a compelling verdict, and in the meantime, speculative pressures can remain alive” (see Poor Fundamentals with Borderline Market Action ). A few weeks later, the surreal calm in the face of seemingly obvious risks prompted the title of my June 2, 2008 weekly comment – Wall Street Decides to Close its Ears and Hum , where I noted “investors appear to be viewing the recent period of weak but not terrible economic news as a signal that the worst is behind us and that clear conditions are ahead.” Memorably, that was not the case.

Though I don’t expect a 2008-type collapse here, I would view a 25% market decline as only run-of-the-mill. I don’t view the probability of recession as 100%, but the leading evidence continues to indicate recession as the most likely probability. While we track a very broad set of data, a crude but useful rule of thumb is that the combination of a) an upturn in the OECD leading indicators (U.S. and total world), coupled with b) a turn to positive growth in the ECRI weekly leading index, has generally been a good sign that recession risk is receding. Those shifts can occur fairly quickly, but we don’t observe them at present.

Read the whole letter >

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We thought we had it all figured out before this week started.

We were wrong.

The top minds in the investment business offered some novel analysis, broke conventional wisdom, and even opened our eyes to some misperceptions.

This particular week we learned that the Obama recovery is stronger than Reagan’s, Reagan’s recovery is stronger than Obama’s, the real reason why Wall Street loves leverage, and that many respected investors are staying away from the Facebook IPO.

What follows are excerpts from such stories this week.  All of the important stuff you might have missed this week, right here.

SOLVED: The Real Connection Between Stocks And Treasuries

“The connection is not between stocks and yields, but between PE ratios and yields, and although the stock market has been gaining, that’s apparently not been due to significantly higher PEs. The good news for equity investors is that, at least as Kitano sees it, long-term rates are likely to rise thus pushing up PE ratios.”

Read more here >

Why The Obama Recovery Has Been Much More Impressive Than Reagan’s

“If you really want an apples-to-apples comparison, it’s hard to fathom why Reagan doesn’t have to answer for a recession happening so soon on his watch, and why he only gets measured on those two years. What’s more, as you can see in the chart above, the 1984-1988 period was pretty average, so we’re really just talking about two years of really impressive morning-in-America growth.”

Read more here >

Why The Reagan Recovery Was Much More Impressive Than Obama’s

“In the first ten quarters of the OR, GDP is up a total of 6 percent. During the first ten quarters of the RR, GDP rose 15 percent. Point for Reagan. In the first ten quarters of the OR, the economy created 790,00 jobs. During the first ten quarters of the RR, the economy created 7.5 million jobs  Point for Reagan.”

Read more here >

See the rest of the story at Business Insider

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See the rest of the story at Business Insider

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This post originally appeared at GlobalPost.

Unemployment is up, the economy contracted in the last quarter, so austerity cuts are biting, right?

That has been the tone of not only my reporting in the last year but all reporting about the British economy. It has been the framework for political criticism by the opposition Labour party.  Its mantra has been “too far, too fast.”

A report released yesterday by the Institute for Fiscal Studies  puts all that in a different light. The IFS is the most respected independent economics think tank in Britain, its pronouncements frame the debate. This is what it found:

Just 2.3 percent of the austerity cuts have been carried out. That means, according to the IFS director Paul Johnson, “More than £9in every £10 of planned public service spending cuts is still to come.”

In some ways that is not a surprise. Not since World War 2 has there been such a sustained period of cuts put in place. Just planning for them must take an enormous amount of time. But what is shocking about the IFS report is this: with so few cuts put in place the British economy is already tanking.

Here’s the money quote from the report, as far as I’m concerned.

“The austerity program has been a significant drag on growth in recent quarters … The austerity program has also dampened net job creation.”

I think that is stating the bleeding obvious, but the fact that it comes from the IFS gives it weight.

Throw in the fact that the euro zone crisis has slowed economic activity throughout the EU and you get a situation where growth through trade will be anemic at best in the next couple of years.

The IFS suggests that Chancellor of the Exchequer George Osborne come up with a £10 billion ($15.7 billion) stimulus in his budget to be presented next month to help Britain out of recession. This could be achieved through tax cuts or increased spending.

The IFS has been hawkish about deficit reductions in recent years. This suggestion represents a serious change of position.

The government says it will not ease up. If you consider that the economy has contracted with so few of the cuts actually made you wonder what will happen when the other 90 percent of austerity cuts to state spending are put in place.

And even if the de-leveraging program is completed as planned by 2016, it will only reduce the size of government spending back to what it was in 2005.

Lots of pain, for not much gain.

Why?

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Most people are aware that the labor participation rate — the percent of the population that is both unemployed and unemployed (i.e. the total labor force) — has declined precipitously since the recession,  now standing at 64 percent.

Take out the unemployed, and that ratio declines even further.

This figure, called the unemployment-population ratio, stood at 58.5 percent in December — a 6.6 percent drop from 2007.

Credit Suisse’s Neal Soss and Henry Mo recently wrote a paper discussing what effect this decline will have on GDP.

A long stretch of low employment-population ratio suggests that the economy loses the productivity that would have come from those “idle” workers. This syndrome reduces potential GDP, the only ultimate wellspring of fiscal solvency and economic well-being.

Why is the emp-pop rate falling?

They first point out that population has been aging significantly. Due to these structural factors, the rate’s been declining since 1996.

But the Great Recession has put the decline on steroids.

The authors found that only one-third of the ratio’s recent acceleration can be chalked up to shifting demographics (ie aging population). The rest results were brought on by cyclical factors (ie plummeting demand from a weak economy).

Soss and Mo believe the only way to address this problem is with counter-cyclical policies, which leads to the author’s final prediction: QE3 remains likely.

The FOMC’s decision to push its forward guidance on exceptionally low rates from “at least through mid-2013” to “at least through late 2014” underscores members’ sense of urgency in taking more counter-cyclical policy. In our view, QE3 is still likely. We expect a program to commence in the next few months with a heavy emphasis on buying mortgage-related securities.

Now click here to see the only states that have regained most jobs lost during the recession >

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The UK economy needs a fiscal boost of £10 billion to £20 billion in order to avoid another recession, a leading think tank said today.

In its annual Green Budget, The Institute for Fiscal Studies calls for Chancellor George Osborne to include a short-term fiscal stimulus in his budget.

This would buffer the UK economy against the eurozone crisis and the possibility of another recession which could see GDP falling in 2012 and 2013, and a substantial increase in national debt.

The stimulus could take the form of a temporary reduction in employers’ National Insurance contributions or VAT, or could be achieved by increasing investment spending.

‘Should the eurozone break up, or the economy do much worse than forecast for other reasons, then future borrowing would be increased and one – or both – of the Chancellor’s fiscal targets would be broken,’ the IFS said.

The think tank has cut its forecast for UK economic growth to just 0.3 per cent, substantially lower than Government’s 0.7 per cent target.

The report claims that the scale of the government’s austerity strategy is “almost without historical or international precedent” but by the end of the current financial year only 6% of the cuts will have been implemented.

The government is expected to beat its 2011/12 deficit reduction target of £127 billion by £3 billion.

IFS director Paul Johnson said: “The Chancellor faces his third Budget with the economy and public finances in considerably weaker shape than he had hoped a year ago.

“While it looks as though central Government is going to underspend against tight spending plans, this neither leaves much space for any permanent fiscal loosening nor avoids the fact that the vast majority of the planned – and unprecedentedly big – public service cuts are still to come.”

There was also some good news on the economy today, with Markit’s/Cips’ purchasing managers’ index (PMI) revealing that the UK manufacturing sector has returned to growth.

In January, activity in the manufacturing sector was at its highest level for eight months, reaching 52.1 points on the PMI index, where a reading above 50 indicates growth.

This represent a significant improvement from 49.7 in December, with manufacturing output and new orders increasing while manufacturing costs fell.

Economic uncertainty and the threat of another recession is causing consumers to take charge of their finances and cut back on debt according to the latest figures from the Bank of England.

Personal debt, excluding mortgages, fell by £377 million in December, the biggest fall since records began.

Howard Archer an economist at Global Insight said: “Consumer desire to get a tight grip on their finances is clearly the consequence of current heightened concerns over the outlook for the economy and jobs.

“Consumer confidence was at one of the lowest levels on record in December, and while it rose in January, it was still extremely weak compared to long-term norms.”

According to market research firm GfK NOP, consumer confidence recovered slightly this month, with an increase of four points to minus 29, its highest level since June 2011.

The improvement suggests that consumers are becoming more optimistic that the economy and their own finance will improve, even though GDP contracted 0.2 per cent in the final quarter of 2011.

GfK NOP attributes this improvement in consumer confidence to a fall in inflation and a sense of optimism carried over from the Christmas celebrations.

Last week Aviva published its Family Finance Report which suggests that families may be struggling with debt more that other groups.

The report suggests that family debt excluding mortgages has increased by 48 per cent in the last twelve months to £7,944.

Families have taken on another £2,500 in loans and credit card debt to fund the increase in their living costs, which have outstripped the average increase in incomes of around 7 per cent.

Credit cards account for the largest proportion of unsecured personal debt, with families owing an average of £2,314 on their cards.