"Why So Glum? Numbers Point to a Recovery"

[Clio the Leo]

Why So Glum? Numbers Point to a Recovery
By FLOYD NORRIS
Published: April 8, 2010

The American economy appears to be in a cyclical recovery that is gaining strength. Firms have begun to hire and consumer spending seems to be accelerating.

That is what usually happens after particularly sharp recessions, so it is surprising that many commentators, whether economists or politicians, seem to doubt that such a thing could possibly be happening.

<snip>

The employment report for March, released a week ago, was a milestone that has been little noted. The household survey, from which the unemployment rate is calculated, showed a gain during the first quarter of this year of 1.1 million jobs, the best performance since the spring of 2005.

True, the more widely reported numbers from the survey of employers are not as good. But those numbers are subject to heavy revision as better data becomes available. At the turning points for employment after the last two downturns, those numbers turned out to be far better than was reported at the time.

Employment is a lagging indicator. Employers can be slow to cut back when business turns down, and slow to rehire when it picks up. It stands to reason that when employers cut back sharply — as happened in this cycle — they will have to rehire faster than if they had been slow to fire, as was true in the two previous downturns.

I looked back at the recoveries after seven recessions from 1950 through 1982 and found that, on average, such a strong three-month performance of the household survey, defined as a gain of at least 0.8 percent in the total number of existing jobs, came seven months after the recession had ended, with a range of two to 13 months.

If the 2007-9 recession ended in August, as the index of coincident indicators would seem to indicate, the lag this time will have been seven months.

The lag was 28 months after the 1990-91 recession ended, and an amazing 42 months after the 2001 downturn concluded. Those really did deserve the title of “jobless recovery.” But they were very different from what appears to be unfolding now.

<snip>

Some Americans are in deep trouble, to be sure, and the days of paying for second homes by refinancing the mortgage on the first will not return soon. But many Americans — both individuals and businesses — who cut back sharply when fear was at a peak a year ago are now finding that they overreacted. The businesses need to hire to meet demand, some of it coming from individuals who are less fearful now of losing their own jobs.

In 1982, Democrats scoffed at a surging stock market and thought a severe recession would last for a very long time. They were confident that the economy would doom Ronald Reagan’s re-election campaign in 1984. All they had to do was make clear they offered a stark alternative to the failing policies of the incumbent

Change a few words (Reagan to Obama, Democrats to Republicans, 1984 to 2012) and you have an accurate description of the current political climate. Could the Republicans be as wrong now as the Democrats were then?

http://www.nytimes.com/2010/04/09/business/09norris.html

[Jennicut]

1. I think the problem is it was such a severe recession. And the amount of unemployment

has been incredibly high in this recession. People are cynical, skeptical and still scared and worried. But I think things will definitely get better this year, though it will be a slow process.

[Kurt_and_Hunter]

2. red herrings abound

1) this is not a cyclical recovery because we didn't have a cyclical recession
2) this recovery is nothing like 1982
3) the fact that employment always lags does not mean that we are always in an explosive recovery. This mutton-head seems to think that since employment sucked in 1982 and employment sucks today that unemployment is a signal of recovery.

The author should actually look at the recovery from 1982. There were successive quarters of double-digit GDP growth. 1983 was over 8% for the year IIRC.

We are in a recovery that looks okay because we are rebounding from incredibly low levels. And the recovery may continue. And that is a good thing.

But since 1982 was largely cyclical and not a bubble-collapse and did not feature 1/4 of the country being upside-down in the investment (housing) that was expected to pay for college and retirement and such it is not the same thing. But yes, unemployment was really bad in both cases. Unemployment was also really bad when we demobilized the military after WWII but that is no basis to deduce that we just whipped the nazis.

So what is the comparison being made?

Political opponents of a president talked down the economy in 1982 and talk down the economy today.

Well, yeah...

That is a fixed and universal feature of politics and since it proceeds almost independent or real world events it contains almost no information.

Partisans in any field tend to make inferior predictions... largely because they are not making predictions! They are shaping public opinion, not saying what they believe to be the ultimate truth.


There is a good chance that Obama will follow the paths of Reagan and Clinton and win re-election due to an improving economy.

And that is about as far as the comparison ought be stretched.

[NJmaverick]

3. K&R

[progressoid]

4. Why? Because nothing is being done to prevent the crooks and liars from fucking it up again.