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It's a recession! Er, no it isn't!


NEW YORK - Merrill Lynch & Co. raised the flag of recession yesterday - and lowered it after less than an hour.

"We are now reviewing our forecast and think the economy could be beginning to look recessionary," chief economist Bruce Steinberg wrote in a note distributed by e-mail just before 9:30 a.m.

In a second e-mail tagged "additional details," the view had shifted: "After further consideration, we are not, at this point, moving to a recession forecast," Steinberg wrote.

The running commentary came after the Labor Department said the economy lost 223,000 jobs in April, more than in any month in the past 10 years. Merrill had forecast that the economy would add 40,000 jobs.

Wall Street pundits are quick to respond to U.S. economic statistics with analysis telling clients how the economy and markets may fare as a result. Getting it right the first time, investors say, can be tricky.

"You feel you have to say something, so sometimes you say it too quickly," said Gene Grandone, head of research at Northern Trust Corp. in Chicago. When a Merrill Lynch broker called Northern Trust yesterday morning to share the biggest brokerage's insights, he pointed to the jobs report as a recessionary indicator, Grandone said.

"He said there's never been a time when you had two negative numbers in a row - in terms of these jobs numbers - when you didn't have a recession." The economy lost 53,000 jobs in March.

In the second e-mail, Steinberg commented that while two consecutive payroll declines have "almost never" occurred without a recession, the pattern may be different this time because the Federal Reserve has been cutting rates faster than ever. The central bank has dropped its target for overnight lending four times this year, including a surprise half-point cut April 18.

By 11 a.m., Steinberg had sent out a third note, with more on that topic.

"After the March payroll decline we commented that another decline would probably mean a recession had arrived. But we're still not ready to make that call," he wrote. "A third month of payroll decline would make it hard to deny the economy had slipped into recession."

Steinberg did not return calls seeking comment. Angela Wrigglesworth, a Merrill Lynch spokeswoman, said, "We try to send these out as quickly as possible."

Steinberg wasn't the only one to take some time to figure out the report's significance. Investors also did a double-take.

U.S. stocks fell immediately after the report came out amid concern that the economy is slowing and that consumers worried about losing their jobs will curtail spending.

The Nasdaq composite index fell as much as 2.7 percent after the opening bell before it rebounded. It finished the day 2.1 percent higher.

The Dow Jones industrial average fell more than 1.1 percent before rebounding to close 1.4 percent higher.

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