Economist Sees U.S. Recession 'Right Now'

Will the U.S. economic slowdown reverse -- or get even worse? Jason Schenker, economist at Wachovia, and James Smith, chief economist at Parsec Financial Management, joined "Morning Call" to debate the meanings of economic indicators. Two examples: Tuesday's strong consumer-confidence figures versus "terrible data coming on autos."

Smith, also a finance professor at Western Carolina University, gave CNBC's Liz Claman a sobering forecast: "We're probably in a recession right now -- and if not, we will be in a couple of months." He pointed to rising unemployment, sinking business fixed investment and flat retail sales.

Binding all these together, Smith said, is the "early warning since last July": the inverted yield curve, during which short-term interest rates bring higher yields than longer-term ones. The professor maintained that throughout the 1900s, the inversion happened 17 times -- "and 17 times we had a recession."

But Schenker insists that the validity of a yield-curve analysis "depends on which part of the curve you look at."  He said that in "more recent history," the yield curve has led economists to predict recessions that didn't occur -- and he warned of future "false positives."

Schenker's optimism is buoyed by "healthy" 4.5% unemployment, a "surprising," stronger consumer outlook and Institute for Supply Management (ISM) surveys looking up for both manufacturing and non-manufacturing sectors.