Monday, June 06, 2011

The Current Economic Recovery in Perspective



The charts above show how the current economic expansion compares to the last two expansions (following the 1990-1991 and 2001 recessions) in terms of: a) employment (nonfarm payroll) recovery (top chart), and b) output (real GDP) recovery (bottom chart), from the Minneapolis Federal Reserve website (updated through May for employment).  Note that:

1. For employment (top chart), the job gains during the current expansion (red line) are actually quite a bit better 23 months into the expansion than in the comparable period following the 2001 recession (green line), and a bit worse than the job gains following the 1990-1991 recession (yellow line). 

2. The recovery in real output (bottom chart) seven quarters into the current recovery (red line) is about exactly the same as the output recovery following the last two recessions.

 With the interactive charts at the Minneapolis Fed website, you can add more post-recession periods and see the big difference between the much faster and stronger recoveries in the 1950-1980 period than the sluggish recoveries ("jobless recoveries") following the last three recessions (see chart below).   But for the post-1990 period, the current economic recovery seems pretty average, at least in terms of gains in employment and output at 23 months (7 quarters) since the end of the recession. 


27 Comments:

At 6/06/2011 8:14 AM, Blogger Rufus II said...

This one's going to double-dip.

 
At 6/06/2011 8:31 AM, Blogger morganovich said...

this unemployment is also much nastier and chronic than past recessions:

"About 6.2 million Americans, 45.1 percent of all unemployed workers in this country, have been jobless for more than six months - a higher percentage than during the Great Depression."

http://cr4re.com/charts/charts.html#category=Employment&chart=DurationUnemploymentMay2011.jpg

 
At 6/06/2011 10:00 AM, Blogger Randall said...

The trouble with comparing 2001 and 2007 is that 2001 was barely a recession. GDP barely hiccupped then, and job declines were slight.

Normally, the steeper the decline, the steeper the recovery. Even granting this comparison, the 2001 recession recovery is the only one of the other postwar ones "worse" than this one.

This recovery is anemic, and I give double-dip a 50-50 shot.

 
At 6/06/2011 10:01 AM, Blogger TheMichaelOnline said...

I agree that this post seems very misleading. All one has to do is click the Fed link, switch from recoveries to recessions, select the same dates, and oh, wow, you see that this recession was much worse than the other two.

So: much worse recession, roughly same recovery.

 
At 6/06/2011 10:06 AM, Blogger Buddy R Pacifico said...

morganovich, what is NFIB?

- - - -

A tremendous amount of capital, human resources and government backing has been put into housing. A recovery in housing should be thought of as a turn-a-round in the slope of prices.

The folks that built houses will have to find work in other industries. Resources have to be better allocated to competitive industries to provide sustained payoffs in job creation. Housing was a giant mis-allocation during the last decade, that built a house of cards.

The other major problem, that leaves the economy with significant problems, are sustained trade deficits. Mutual Free Trade is wonderful but most of the U.S. trade is not. Either the U.S. moves on to mutual Free Trade, or discontinue trade with non Free Trade countries. Non Free Trade is a mirage that deceives Americans with claims of competition and cheats U.S. comparitive advantage.

 
At 6/06/2011 10:16 AM, Blogger morganovich said...

buddy-

NFIB = national federation of independent businesses

http://www.nfib.com/nfib-on-the-move/nfib-on-the-move-item?cmsid=57186

als0:

regarding free trade - free trades creates jobs, it does not reduce them.

a US job lost to imports is always more than made up for in the rest of the economy. the imports have lower prices. that leaves extra money to spend on other goods and services which creates other job.

there is always a deadweight loss from a tariff, thus eliminating it creates real wealth and thereby jobs.

there is no positive correlation between trade deficits and US GDP growth or employment.

 
At 6/06/2011 10:40 AM, Blogger Buddy R Pacifico said...

morganovich, thanks and then your comment:

"there is no positive correlation between trade deficits and US GDP growth or employment."

See your comments above for positive correlation!

 
At 6/06/2011 10:51 AM, Blogger Buddy R Pacifico said...

This comment has been removed by the author.

 
At 6/06/2011 10:54 AM, Blogger morganovich said...

buddy-

this employment issue has nothing to do with trade deficit.

http://en.wikipedia.org/wiki/File:US_Trade_Balance_1980_2010.svg

the US trade balance became steadily more negative through all of the late 90's while the economy boomed and we hit the lowest unemployment numbers in the post war period.

 
At 6/06/2011 10:57 AM, Blogger morganovich said...

looking more closely, you can see the negative correlation.

80's, great growth, increasing trade d.

end of 80's-early 90's, weak economy reducing trade d.

late 90, huge boom and huge increase in trade d.

the record is pretty clear.

 
At 6/06/2011 11:16 AM, Blogger Buddy R Pacifico said...

"the US trade balance became steadily more negative through all of the late 90's while the economy boomed and we hit the lowest unemployment numbers in the post war period."

Let's bring this quote up-to-date:

The U.S. trade balance became steadily more negative through all of the first decade of the 2000's while the economy sank and we hit the highest unemployment numbers in the post war (WWII) period.

___

morganovich and I agree on the positive benefits of job creation from Free Trade. The vast majority of U.S. trade is not Free Trade. It's time to scrap non Free Trade relations for the U.S. because they are destructive frauds for the U.S. U.S. comparitive advantages are quashed through bureaucratic manipulations, by most export oriented U.S. trading partners. Recent U.S. Free Trade agreement negociations have addressed these problems agressively.

 
At 6/06/2011 11:32 AM, Blogger morganovich said...

"The U.S. trade balance became steadily more negative through all of the first decade of the 2000's while the economy sank and we hit the highest unemployment numbers in the post war (WWII) period."

um, note that the trade deficit shrank rapidly from 2006-9, the very period in which we hit this huge economic pothole.

that would seem to argue once more against your position.

compare the economic performance from 2002-6 (increasing deficit) to that of 2006-2009 (decreasing deficit).

which was the better period?

 
At 6/06/2011 11:55 AM, Blogger Buddy R Pacifico said...

morganovich, your quote:

"compare the economic performance from 2002-6 (increasing deficit) to that of 2006-2009 (decreasing deficit)."

The U.S. trade deficit grew from $200 billion in 2000 to about $700 billion in 2006. It stayed approximately at $700 billion un til the collapse that started mid 2008.

This argues stronly for my position. Massive, massive trade deficits and the housing bubble, along with profligate gov't spending, are the causes of Great Recession and resulting persistent high unemployment.

 
At 6/06/2011 12:43 PM, Blogger Sean said...

morganovich,

regarding free trade - free trades creates jobs, it does not reduce them.
Free trade generates production globally: it may be neutral to job creation and may affect the distribution of jobs. That said, I agree that we won't do any better with protectionism.


a US job lost to imports is always more than made up for in the rest of the economy. the imports have lower prices. that leaves extra money to spend on other goods and services which creates other job.
This is not necessarily true, because participation in production is variable (if you lose skilled jobs and don't find other skilled jobs, you can be worse off because your level of participation in the global economy is reduced). But it is usually true because usually you can usually retrain in another skilled job and still participate with lower consumer prices.

 
At 6/06/2011 1:21 PM, Blogger morganovich said...

"Free trade generates production globally: it may be neutral to job creation"

that is not correct, nor is your other point. you are just not iterating it enough.

you seem to agree that all tariffs create a deadweight loss.

recovery of that is purely a domestic wealth issue. we are wealthier in real terms from the imports.

this may not be so of everyone, as you might lose your sugar growing job, but every job lost is replaced with a greater amount of overall buying power.

this filters into he rest of the economy.

if it is spent on cheaper imports, it repeats the process.

this creates jobs.

that said, i do not thing job creation is really the metric to work towards, just a politically popular one.

the better metric is quality of life and personal wealth in real terms.

a drop in the price level by 10% makes you better off than a 5% increase in earnings.

if you have any savings, a 55 drop in prices makes you better off than a 6% increase in earnings.

yet we try to manage to job creation because it is politically expedient and therefore pursue insane inflationary policies (tariffs, wildly loose money, bailouts) that wind up making us worse off.

 
At 6/06/2011 4:04 PM, Blogger James said...

morganovich, Buddy R Pacifico,

Do you guys really believe that if from 1970 to 2011 we had had the same tariffs that we had from 1870 to 1911, roughly 40 percent, instead of free trade, that unemployment today would be worse that it is?

 
At 6/06/2011 4:28 PM, Blogger Sean said...

morganovich,

that is not correct, nor is your other point. you are just not iterating it enough.
No, there is absolutely nothing that guarantees that money in the US will ever generate a high level of employment in the US. In practice, we have a huge service industry that exist so long as enough there's money around, and that money doesn't have to be made by local labor.


you seem to agree that all tariffs create a deadweight loss.
Yes.

a drop in the price level by 10% makes you better off than a 5% increase in earnings.

if you have any savings, a 55 drop in prices makes you better off than a 6% increase in earning

True.


that said, i do not thing job creation is really the metric to work towards, just a politically popular one.
People get irritated at a 5% loss in pay. A 5% increase in people without a job can get millions of angry people out on the streets with nothing positive to do with their time. And considering the number of people in this country that live paycheck-to-paycheck, it should be no wonder that unemployment is the political indicator of choice. I think you undervalue the negative externalities there.

this may not be so of everyone, as you might lose your sugar growing job, but every job lost is replaced with a greater amount of overall buying power.
Again, generally true. But if, for example, Apple could pick up and move to China to get a 70% cut on research costs (and did), do you think it would affect the price of an Ipod? Any measurable amount would be enough, but it doesn't *have* to happen. There just is no guarantee we'd come out ahead if the gains aren't passed to the consumer.
But if you don't replace that job at the sugar plant, I can guarantee you won't care whether everybody benefits or not.

 
At 6/06/2011 11:23 PM, Blogger Buddy R Pacifico said...

James stated:

"Do you guys really believe that if from 1970 to 2011 we had had the same tariffs that we had from 1870 to 1911, roughly 40 percent, instead of free trade, that unemployment today would be worse that it is?"

James, if we had truly mutual Free Trade between the countries we trade with, I think we would have considerably less unemployment. Our trade relations with export oriented countries has not been Free Trade, but rather a phony ruse of compeition for probably dubious reason.

Our current 4% average tariffs on about 4% of goods imported into the U.S. is really low. 40% tariffs would certainly stifle imports but it would also be destructive to the U.S. How could Asia and Europe have been able to overcome the devastation of WWII without trade with the U.S.? The U.S. prospered as the pre-eminent exporter and creditor to Asia and Europe.

How we got into trade relations with export oriented countries that systematically shut out U.S. goods and services by non-tariff barriers is the real back story and not tariffs so much.

Erecting non-tariff barriers, that are always changing, is where the success has been and continues to be, for most of our major trading partners.

 
At 6/07/2011 8:07 AM, Blogger morganovich said...

"Do you guys really believe that if from 1970 to 2011 we had had the same tariffs that we had from 1870 to 1911, roughly 40 percent, instead of free trade, that unemployment today would be worse that it is?"

yes. we would have had higher unemployment, lower real growth, less wealth/property accumulation, and higher inflation.

 
At 6/07/2011 8:14 AM, Blogger morganovich said...

sean-

i think you are missing the point here.

if apple offshores and others in the industry do likewise, then competition will cause a drop in prices. they do not exist in the vacuum your are assuming.

prices dropping increases the buying power of everyone.

that increased buying power makes everyone better off EVEN if no new jobs are created. the economy grows in real terms.

however, new jobs will be created. this extra buying power will drive it. you'll eat out more or whatever. that creates jobs equivalent to the savings.

if you spend some of the savings on more foreign products, this cycle just repeats itself. you only buy foreign things if they are better on price/performance than domestic ones.

all of this drives real growth.

real growth is the one thing that drives job growth.

so, which part of this are you disagreeing with?

do you agree that free trade drives real growth?

do you agree that real growth drives job creation?

to argue that tariffs save net jobs is to argue that lower growth promotes job creation.

 
At 6/07/2011 8:18 AM, Blogger morganovich said...

buddy-

i think you are leaving out an important issue.

dropping our own tariffs is a net benefit to us no matter what the rest of the world does.

even if no other country in the world allowed our products in, we'd be better off with no tariffs.

emulating their bad policies through retaliatory tariffs would only hurt us.

reciprocity is not necessary to benefit from trade.

 
At 6/07/2011 10:36 AM, Blogger Sean said...

morganovich,

if apple offshores and others in the industry do likewise, then competition will cause a drop in prices. they do not exist in the vacuum your are assuming.
I guess I've been arguing that offshoring has been more of a virtual cartel action, with many of the gains going to record corporate profits rather than lower consumer prices because corporations are loathe to be the first to lower margins and the barriers to entry are high enough to make that a viable position.
But I could be wrong about that: it's basically speculation beyond information I have.


that increased buying power makes everyone better off EVEN if no new jobs are created. the economy grows in real terms.
Prima facie, yes. Here I think you are missing the point about the costs of low employment on those who have jobs. In a society with elements of socialism like ours, we pay overhead on that. On a society without those elements, the overhead is in crime rates. And where there is volatility, you'll find a certain percent of people just never fully adapt.



do you agree that free trade drives real growth?
Globally, it does. Locally, it is generally positive and at least not negative except in cases where multiple competitors are willing to take large losses in the hopes of establishing a monopoly. Economic suicide pacts are not rational, but they *are* possible.
If you get multiple state-subsidized entities going after the auto or DRAM market, consumers of those items win, but the oversupply by government-sponsored entities drives down wages, reduces innovation, creates political tension, makes taxpayers poorer, perpetuates itself because in countries with a few big employers it still *looks* like victory both locally and for car buyers. But it's a loss for everyone in the long run. The same kind of thing can actually happen without government intervention, although it's less likely. The Itanium family certainly looked like that kind of thing for a long time.

do you agree that real growth drives job creation?
All else being equal, yes. But all else is not equal.


to argue that tariffs save net jobs is to argue that lower growth promotes job creation.
Yes, it's to argue that the resultant lower volatility can reduce job destruction less than it hampers job growth because it prevents corporate idiot investors and CEOs from playing stupid games to increase short-term profits by 5% and cash out.
I don't think I actually believe that, but I could certainly make an argument in that direction.

What I'm really arguing is that life is much more complicated than you could believe: there are exceptions to almost everything. This is important, because intellectual purists just will never get all the results they expect. If the real conservatives get their way, they simply won't get all the growth and jobs they promised, and they'll be stuck trying to explain why.

 
At 6/07/2011 10:46 AM, Blogger Buddy R Pacifico said...

morganovich states:

"reciprocity is not necessary to benefit from trade."

This could be true for tariffs but note that the U.S. has just about zero tariffs.

Reciprocity is the wrong concept, because it is the non-tariffs of many export oriented nations, that blockades U.S. goods and services into those countries. The U.S. does not have an export policy that includes the erection of complex non-tariff barriers. Add to that official malfeasance of ignoring U.S. produced intellectual property rights and you have long term harm to the U.S. economy by export oriented countries.

 
At 6/07/2011 11:40 AM, Blogger morganovich said...

"because it is the non-tariffs of many export oriented nations, that blockades U.S. goods and services into those countries. The U.S. does not have an export policy that includes the erection of complex non-tariff barriers. Add to that official malfeasance of ignoring U.S. produced intellectual property rights and you have long term harm to the U.S. economy by export oriented countries"

this still does not matter one iota for our own policy.

if other nations are doing stupid things that hurt their own citizens, let them. there is still no argument for emulating them.

if the whole rest of the world banned import of US goods entirely, we would still be better off with tariff free imports from them.

a retaliatory tariff or NTB is always the equivalent of punching yourself in the face because someone else has punched themselves.

obviously, if you think that nations are stealing your IP due to lax enforcement, an individual company ought to stop shipping to them or to up their DRM. however, there is no governmental remedy. what could they do? ban exports of software to china?

how does that help US companies? all it does is disenfranchise them.

ban imports of chinese software? all that does is penalize american consumers.

 
At 6/07/2011 12:37 PM, Blogger Buddy R Pacifico said...

"ban imports of chinese software? all that does is penalize american consumers."

Why would the U.S. re-import software already available? Oh, I know, it would be cheaper because the cost of acquistion to the "manufacturer" was near zero.

 
At 6/08/2011 8:57 AM, Blogger Sean said...

morganovich,

Having some prboelms with my account, but briefly:


do you agree that free trade drives real growth?
Globally, always. Locally, in the vast majority of cases, but not every case.

do you agree that real growth drives job creation?
Yes.

to argue that tariffs save net jobs is to argue that lower growth promotes job creation.
Or at least that it reduces job destruction more than it hampers job creation. I can make an argument that there are cases where that can be true, mostly due to indirect affects like volatility and herd psychology.

 
At 6/10/2011 9:42 AM, Blogger Matthew said...

This argument is a bit like falling off a cliff 1,000 feet and then managing to climb 50 feet back up, and noting that you were making better progress than that time you stepped off the kerb into the road.

 

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