Recovery – or Not – in Pictures

Simon’s weekend summary included this sentence on the macroeconomic situation: “The real economy begins to bottom out, although unemployment will not peak for a while and could stay high for several years.”

We are now in that phase of the crisis when there is a lot of arguing about whether things are going well or poorly, and that largely comes down to whether the current slowdown in the rate at which things are getting worse (that’s all it is so far) will be followed by a healthy recovery, a prolonged period of stagnation, or an accelerated contraction brought on by higher oil prices, a new bank panic caused by defaults in credit cards and commercial mortgage-backed securities, or one of any number of other factors. I discussed this topic somewhat impressionistically a month ago; this time I’m going to highlight some analyses done by other people around the Internet.

Last time I cited James Hamilton and Calculated Risk, both of whom thought that a peak in the four-week moving average of new unemployment claims was a good predictor of the end of a recession. Hamilton in particular has been following this closely, and while we may have passed the peak, the number isn’t falling like it should. Here’s Hamilton’s picture from last week’s post:


Look at the smooth line in each chart and note how it falls in 1991 and 2001 but doesn’t fall in 2009. The original post also has charts for the three previous recessions.

Paul Krugman looks at the same data and estimates that even though new claims are down from their recent peak, as long as the number remains above 400,000 aggregate employment is still going down, not up. 

If charts are your thing, Paul Swartz of the Council on Foreign Relations has eight pages of them (hat tip Brad Setser), comparing the current recession to all postwar recessions (it’s the worst on most measures) or to all postwar recessions and the Great Depression. Here’s one striking example:


Fascinating late-night reading.

By James Kwak

40 thoughts on “Recovery – or Not – in Pictures

  1. Not to speak ex cathedra, or (as you put it, ‘impressionistically’) but the US and the Eurozone are in for a prolonged period of decline, anemic recovery and stagnation. I don’t know about the rest of the world.

    Part of the problem is that everyone wants to comment on new developments, while the story is found in the continuation of previous developments. Unemployment will continue to rise. Real estate, residential and commercial, will continue to lose value. The insolvency of the financial services sector will become increasingly obvious (thanks to the foregoing, and credit card delinquencies–called by Ms Whitney last fall, as I recall).

    None of this is new. If it continues long enough, you’ll get the restructuring of the financial services sector and compensation limits that you’ve called for. But, boy, at what a cost.

  2. The “World Trade: YoY” chart is telling us something
    – namely that nothing post-WWII is comparable to what is happening now. Not surprisingly you have to go back to the ’30s to find anything comparable.

    Also look at “Investment grade spread” and “BAA spread” that shout the message: this is far from over.

    Actually Mr. Swartz buries the lede. The most important chart of all is the last one – “Real Home Price”. How many people realize that the fall in home prices is dramatically worse now than in the ’30s?

    I repeat – this is far, far from over.

  3. I can across these charts yestarday – frightening…

    …though not unexpected. While the credit/banking crisis may be over (for now), the real economy is still falling pretty fast and at some point that could feed back into the banking system causing another crisis. I think people forget it took the GD 3.5 years or so to become as bad as it was, and the monetary crunch caused by the FED really didn’t happen until 1931 – over a year after the crash. There is still way too much to play out before this can be called over with.

  4. These Paul Swartz charts are so depressing. It definitely doesn’t compare well historically. The only good to see there is industrial production didn’t collapse as severely as during the Depression, and the percentage of unemployed is not nearly as high as during the Depression. And the spread on debt now really punches you in the face on those charts. Ya, I definitely don’t see things improving in the next 18 months, that makes a difference in people’s everyday lives. I think the best we can hope for in these next 18 months is stagnation which gives people time to tighten their belts, time to move into growing fields, time for the government to put some controls on excessive risk-taking in the banking sector. There will be those fools (like our boy Posner) who say there is no need to put in risk-taking controls NOW because the banks will be gun shy, or the banks “have learned their lesson”. But anyone who reads this site knows that’s garbage talk. We need to put these risk controls (example 1: making credit default swaps illegal, example 2: separating commercial banks from investment banks) as soon as can possibly be done.
    Also just the basic step of increasing capital requirements for all banking institutions would be a great move in the right direction. IF YOU LOOK AT CANADA, THEIR BANKS HAVE BEEN MUCH MUCH LESS AFFECTED THAN AMERICAN BANKS. WHY??? This is a question Geithner should be delving into deeply. Here is a link to an NYT blog article which explores some of the differences between Canadian banks regulation, and American banks regulation. Many answers in here for Geithner and his cohorts.

  5. The environmentalists have virtually killed the construction of an 800 million dollar state-of-the art coke plant in Toledo, Ohio.

    Coke will be produced somewhere to fill the need; probably in China with few environmental controls. The US again has lost several hundred NEW well paying, long lasting jobs.

    We are shooting ourselves in the foot and allowing fringe groups to control our future….and our sorry ass government looks the other way. To get anything moving in the US is a very tough ordeal. To have a few fanatics control our destiny is insane.

  6. 2. separate commercial banks from investment banks 3. prevent undercapitalized investment banks from petitioning the Federal Reserve to change their license to overnight receive commercial bank protections 4. do other stuff that doesn’t require finger pointing

  7. Clearly, your chart selection is faulty. You need to either find charts with “green shoots” in them or you need to manually paint “green shoots” lines over the graphs to render them all good and green shooty.

  8. Repent? as in beam me up Scottie? I agree with Bill Maher last night. Obama, get off the tv and start toughening up …..

  9. Obama’s Presidency seems to be over, almost before it began. Unless, of course, he stops being such a wimp…

  10. I guess I have to ask where the jobs will come from when there is a recovery? As we know from prior recessions many jobs lost won’t be coming back. Also today those jobs that are available will be paying less. We’ve never experienced this before. Put this into the metrics and one has to figure out how this country will re-employ 8 to 12 million. What new technology will save us this time?

  11. the environmentalist ‘fanatics’ aren’t as crazy as one might think. In 1000 years, which votes will have made the biggest lasting impression- votes for the environment or votes for lower taxes? Votes that help save the earth or votes that may help save a small segment of a small local economy?

    What about 500 years? Will they care about what decisions we made concerning our economy or those concerning ‘our’ environment? 100 years from now?

  12. Hahaha, very funny. Ya, get used to it Praedor, you’ll be hearing every journalist/political commentator on NPR with no degree in business repeating “green shoots” over and over and over to convince us they actually know what the hell they’re talking about. It has to be the most retarded economics lingo I’ve ever heard.

  13. The problem with much economic analysis in the press is that he models are based on the idea that this is a traditional business cycle instead of an institutional breakdown. Business cycles are sometimes predictable. Fixing a broken financial system, or if you prefer world trading system, is more complicated and will be more time consuming

  14. Obama’s presidency was over when he chose Joe Biden as his running mate, Hillary as S.O.S., and all the other Clinton-debris to run things. He’s now just out there vainly pushing what fragments remain of his original intent, while Summers/Geithner/Emmanuel/Bernanke/Gates/et al operate the controls not-so-behind the scenes.

  15. I was busy for two days but wanted to make a comment on unemployment levels.

    Based on my husband’s company and a few other friends comments there would be more lay-offs in general if it was not for the numbers of people who have vacation time to use up which can no longer be rolled over or saved for a one time retirement payment when they leave the company. I would not be surprised to see another round of buy outs coming this fall if things do not look better. The question is will these people truely retire or join the unemployed?

  16. … what will America DO? meaning, what can it produce COMPETATIVELY vis a vis the now global economy?

    What investing manufacturer in his right mind would take on a predominately obese, slow footed, whiny, over-paid unskilled labourer in America when he can get a ‘lean’, eager, acquiescent – yet ambitious – skilled labourer for a mere pittance of the price off-shore?

    Hey, don’t shoot the messanger. Until this ISSUE is ADDRESSED, a Rosy Future for the American Working Class is over. And therein lies the problem.

    Everyone in America WANTS TO BE ‘middle class’ or better. No-one WANTS TO BE ‘working class’, ie. at the bottom. Well, Raality Cheque please, SOMEONE is always GOING TO BE ‘at the bottom’. Here or there.

  17. What makes you think there will even be an earth in a thousand years? Man is well on his way to destruction, and I don’t mean just the environment. Man has been selfish and uncaring for generations. The damage is done, and will continue to be done. The EPA does not care for people or jobs for those people. They only care about an earth that is already doomed. Meanwhile, they legislate people out of their livelihoods. They are part of the economic problems we now face.

  18. To answer your first question: much and we send it to you to put in other things. NAFTA is still working.

    To answer your second question: Your government seems happy to let descendets of your country back in to fill your labour market.

    As for labour, no more than 20% of the cost of a good should be labour of massed produced items. You will see international companies start to bring in manufacturing when it is used in a more locally made item especially if shipping becomes part of the carbon issue and adds to cost along with fuel cost increases.

    I will not sink to your level with the other comments you made, but will say, I am glad my Dad gave up his dual citizenship with Canada. You have become a bitter nation if you represent the current beliefs.

  19. Brenda

    I live in Canada, was born in Canada, however I am Christian and this world is not my home, so where ever I am on this dying planet filled with both wicked and righteous people, I serve God above all and not man. That being said, judging one nation on the basis of the thoughts or actions of one person would be like telling God you won’t accept His free gift of salvation because another “professing Christian” isn’t acting according as God has commanded in His holy Bible, and has given Christianity a bad reputation (which incidentally is why the seeker friendly (making God be a puppet to the people’s demands) approach to lure/persuade/coerce/deceive/LIE lost people into churches does not lead them to Christ, only a serve me Christ – a false Christ and eventually the lost person is worse than their initial state) and on the basis of that testimony and not God’s standards or what He has said, you have decided to reject God’s free gift – thus pushing your responsibility and salvation on man’s inability, or if one is a Christian to make the man of God the model and not Christ as the final authority. That is what these seeker friendly, man on the pedestal churches do – they say, you too can be the God you have imagined. I am in no way excusing professing Christians actions or words or, they too will be judged, as will you and I. So, in conclusion, there are pockets of God fearing/Christ honoring men scattered throughout the world, thus making it an impossibility to represent a whole nation(s). As to the specifics of what both of you commented on re:wealth/greed/poverty/elitism etc I won’t go into that, I just wanted to comment on the singular generalization as I too once thought just because one small pocket of people or one person’s actions or words may be wicked, does not mean all in that country/city/village are. Choose this day whom you will serve. as to the graver matter at hand – the depression – I speak to all – REPENT.
    in Christ Jesus,

  20. correction – I forgot to include however at last sentence,it should read:

    however this does not mean all in that country/city/village are. Choose this day whom you will serve. as to the graver matter at hand – the depression – I speak to all – REPENT.
    in Christ Jesus,

  21. Yes, we are on the path to destruction-we really began to slide downhill fast when we took prayer out of public schools, legalized abortion, and sanctioned same-sex marriage. We have forgotten that this country and earth belongs to God. Our country is distinctly different from others-from the time of Christopher Columbus to the founding fathers, they sought for and established a land with freedom to worship Jesus Christ, to be a lighthouse to all people. Now we have a president who publicly declares we are not, never have been a Christian nation. While not all Americans were/are Christians, we were established as one, with freedom of religion, not from religion. Our founders publicly stated that God is this country’s source. Read the book “The Light and the Glory” by Peter Marshalll, Jr, and David Emmanuel, as well as our constitution, etc.

  22. What amazes me today is how the majority of Americans seems to think America is or will bounce back sooner or later. All we have to do is get through this, yet the problem is with the “this”!

    Our nation has been on a collision course with God since the late 1800’s. Many have been busy such as the Socialists, the Progressives, and the Liberals patiently squeezing the spiritual life out of America.

    Since the inception of a godless public educational system and the lie about separation of church and state, the generations of Americans growing up in this deceptive and confusing society have been turned toward a humanistic reliance on man.

    This has permeated every area of our life including the Christian environment. True Christianity is rare in America and the sad thing, America cannot be separated from God because that is all we have going for us less we be just another godless society living on some mass of land in this world.

    We are not going to come out of this because, we have become “this”. We are the problem and much more than just repentance is now required from God. We must turn away from our ways and that seems like a big step we are not prepared to do.

    It is up to the born again Christian. Can we let go of our dependence on this secular society, the comforts of America, and the reliance on government. Can we do this for a season, to save a Country?

    This is more than an observation. Our road to recovery must go the way of Golgotha. There is no other way because we are a Christian nation!


  23. Amen! 2 Chron: If my people, who are called by my name, will humble themeselves and pray…. When was the last time America was humble? When do we pray, except when we’re in deep doo doo? What’s going on is exactly what the Bible (oops, did I say Bible?,)says will happen in the last days. Now more than ever, it is time to pray!

  24. You hit the nail on the head! This is the anti-Christ spirit that is in the world, preparing the way for the Anti-christ then the return of the true CHRIST!
    The days will get darker and as they do we must shine brighter with the light of Jesus and let His glory re-new the earth.

  25. To Harley, Todd and Charlene. We have come to a point where ‘save mother earth’, is more important than life and ‘freedom of rights’ have over steped into our privacy. Look at the story of Sodom & Gamorah in the Bible and how close are we to that. LAST DAYS?

  26. Once again, Pride, Arrogance and Greed. We are suppose to manage the earth, not kill it or not use it! We have gone from one extreme to another in the last 200 years. Just look at our history. Now we’re comimg to the point where marriage, respect for one another, and truth will be a crime. Waite and see. But, yes I agree!

  27. Glad to have you as a neighbor!

    If we are truly followers of Christ Jesus, it matters not what country we live in, what color our skin is, what language we speak, it matters that we are to be like Jesus, doing as He did. So until He comes, we best be going about spreading the good news of the Kingdom of God and live as a glory to Him, regardless of where we are located. Do all as unto Him and trust Him to provide. Obviously our governments can’t be our gods–they can’t provide like the True God can.

    I could go on, but you get the point…trust Jesus i.e. God, no matter what happens, no matter where you live or were born! Only through Him is there true peace.

  28. Having read all the comments I am heartened by the fact that the cry is to repent. That was the message of John the Baptist before Jesus’ ministy began. We stand at the eve of the return of Jesus’ second coming and all that is happening in the world has been prophesized. What makes me exited is hearing the heart of the people of God, caring for their brothers and sisters calling for them to repent. The Bible says that the righteous shall inheret the earth, so let us pray for the leaders who are unsaved and trust Jesus that they will see the folly of their ways beforeit is too late.

Comments are closed.