I keep hearing from people that this is not the typical economic recovery. But I don’t see that at all.
We had 25 months of economic contraction with horrific headlines the whole time. Spending decreased, savings increased, unemployment spiked. This led the government and central bankers to throw lots of money at the problem — not so much fixing it, as papering it over.
Certainly, the cause of the recession was not the usual run of the mill factors. Nor was depth or duration. However, it appears — at least according to the charts I see — that this recovery is following a fairly normal script.
Then, a recovery began.
Many people doubted it, recent painful memories being so fresh.
But have a look a the charts below — when I look at year over year changes in areas such as spending, income, jobs — this looks like a typical recovery in hiring, etc.
Isn’t that is typical recession/recovery behavior?
-People hunkered down, and slowed spending. -Market discounted the recession partially. -Unemployment increases. -Consumers get nervous, spend less, save more during the contraction. -Economy bottoms -Markets discounted the recovery. -Employment picks up -As signs of improvement become visible, consumers started spending again.
The consumer response to economic stress was — pardon the word — typical. 1973, 1982, and 1991 saw similar hunkering down, then a return towards normalcy.
Charts after the jump
All charts courtesy of The Chart Store. Click for larger graphs
Come on BR, absent government spending what would your charts look like? 66K in jobs last month were census workers. The PCE increase is all tax refunds, cash for clunkers, home tax credits and other government outlays. Sounds like somebody has some Amazon shares he wants to dump:) At least you are doing it the old fashioned way by obfuscating reality and not trading on non-public information like the Oracle and his Moody’s:)
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BR: Out of nearly 300k, plus major revisions upwards for prior months — you gotta do a better job taking a non biased approach.
BR, you been hook’n up with Ben B. lately?
AND — People are under-appreciating what low low housing prices mean to spending going forward.
Housing is basically 40% of the consumption basket. What happens when that expense is cut in 1/2?
@cognos…so then when housing prices drop another 20% every adult American will be able to own a home even though compensation has gone nowhere over the last decade?
Barry, those financial charts don’t reflect reality for the majority of Americans. Those charts are dominated by the wealth of the investor class, who have done really well for most of the past year. Go do the comparison at the 2nd and 3rd quintiles of income, or at the high school/bachelors degree education level. That is where the engine of our economy is driven, and the economy hasn’t got better at all down here. Even the uptick in job creation (largely federal) was drowned by the number of people who can no longer afford to be “no longer looking for a job” and started putting resumes out again.
RE: Personal Income Chart ____________________
Interesting trend reversal in the annual rate of change portion of the chart in 1980.
I wonder what happened in 1980.
Oh, yeah: Trickle down.
Then, there’s this observation by BR: “. . . that this recovery is following a fairly normal script.”
Please, BR, show me any other “recession” where we have had QE policies designed to support the banks at the expense of the citizenry. Show me the precedent for government/Fed ownership of toxic assets. Show me another recovery where actual employment, income, and corporate profitability went and stayed down (that’s to say, profitability without fraudulent GAAPs and off-balance sheet storage of losses). Show me a recovery that included bankrupt states and municipalities.
This is NOT your father’s “recession (it’s your grandaddy’s Depression).
10% UE two years into this thing.
Who on earth would consume a damned thing beyond absolute essentials?
If by ‘typical” you mean over 2 trillion injected directly into the global financial system by the FED and the ECB then yes -
BTW, BR: if this “recovery” is on track to become the upside of a typical pot hole in the road to general, widespread prosperity, please explain why you're in all cash mode.
Analysis is incomplete without looking at public and private debt levels.
Maybe it’s early, but those bounces upward look anemic versus the prior recessions. Deleveraging does not help.
@cognos, home prices aren’t what squeeze budgets; it’s mortgage payments. And back in the bubble, teaser rates were keeping those payments low. Perhaps new mortgage payments (or more likely new rent payments) will be lower than the payments when mortgage payments ballooned, but we have more recasts coming in the next few years. The pace of the recovery is fragile, propped up by unsustainable government spending and fed intervention.
Does a bunch of charts change the macroeconomic facts of the high debt levels,Europe and China vulnerability and high fiscal deficits ?
For a Keynesian this may be true as aggregate demand is picking up. However, the amount of fiscal and monetary stimulus to get us there is unprecedented. Also, the debt levels and market valuation compared to 73 and 81 are substantially higher today. So Austrian economists are negative, but Keynesians see a normal recovery.
I guess to be fair, by the criteria you set out, it is a “normal” curve. The problem is that those criteria will never catch any differences between recessions; they are too broad and basic.
This has been an investors recovery so far. Even the bulk of government spending to fight the recession has gone to help the investors. You point that out almost daily, BR, though not specifically in those terms. If the money we had spent on bankers and investors had been spent on, say, infrastructure, schooling, and scientific/medical research, there would be a lot more people employed, a lot more lives improved, and the foundation for a real recovery would have been set.
As it is now, the money has gone into the “investment” casino. There the value of the money is essentially nil, and it doesn’t create many jobs, and just improves the lives of a few people who already had really easy lives. What value was created is easily wiped out by a feedback of computer algorithms (as we saw last week), by the herd motions of the market, and by manipulations of the largest players.
There is no job creation from investment money anymore. It won’t be used to create businesses or facotries, those things are too high risk and too long term compared to computers buying bits of theoretical ownership with each other.
That is what makes this recovery so different. most recessions are founded in the wealth distribution becoming unsustainable, so that the money isn’t there to flow through the lower part of the economy. recovery comes when that is rebalanced. There is almost no rebalancing effort this time; our idealogical divide is too great now, the wealth imbalance is too great, and the Randian/Invisible-Handian mindset is dug in too strong. The only “recovery” many will accept is if the lower classes simply learn to accept less of the American Dream.
BR is using the stock market to prove the health of the main stream economy, when in fact there is very little correlation. If the market was down he could use those same graphs to show how poorly the bailouts worked. He also clearly sees no problem with continued deficit spending as long as he gets his cut before the dollar devaluation occurs. He is dependent on Phil Gramm’s ‘whiners’ comment to be true to continue his lifestyle.
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BR: How do you figure? I showed four charts — hiring, spending, income saving.
I barely mentioned the market.
Yes, this is the typical ZIRP and spend trillions of dollars we don’t have style recovery.
I think the chart you’ve posted before, from Calculated Risk, says otherwise — at least sort of.
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