Sunday, July 31, 2011 – 11:25 a.m.

For months has been warning of a second recession. A recession that will be even worse than the previous.

And last weeks report on the U.S. economy should be taken as a precursor to such a recession.

Economic Output

Gross Domestic Product (GDP), refers to the market value of all final goods and services produced within a country in a given period

On Thursday, the U.S. Commerce Department revised downward the GDP for the first quarter of 2011 from 1.9% to a stunning 0.4%.

A rare, steep and almost unheard of revision in terms of magnitude.

The initial GDP number for the second quarter of 2011 was an anemic 1.3%. A number that could conceivably be revised to flat or negative percentage in October.

A negative number for two consecutive quarters is considered a recession by most economists.

Deteriorating unemployment, high energy prices, inflation and cuts in government spending is sending the U.S. economy down.

Unlike the previous recession where government was still spending heavily, the new recession will likely be driven by reductions in government spending.


Expect the unemployment number to rise well above the current published 9.2% unemployment rate.

The next rise will be driven by mass private sector layoffs coupled with renewed layoffs of government workers.

The underemployment rate, which takes into account people off of unemployment assistance, people working part-time and those who have stopped looking is roughly 19% nationally.

In the Inland Empire this number is likely closer to a depression-era 25%.

Approximately forty-two percent of the City of San Bernardino is on some form of public assistance.

Energy Prices

Sustained high crude oil prices has kept the retail price of gasoline hovering in the high four dollar per gallon range. Small gyrations in price has provided some relief to consumers.

U.S. Budget and Debt

Here is the primary death-blow to any meaningful economic expansion.

The federal government has no choice but to cut spending in order to get the nation’s debt problem under some semblance of control.

The cuts at the federal level will have a dramatic impact on state and local governments across the country.

The primary effect of the aforementioned cuts is and will be layoffs.