Showing posts with label Recessions. Show all posts
Showing posts with label Recessions. Show all posts
Sunday, January 8, 2012
Friday, November 12, 2010
Sticky Wages Hold Back Job Growth - Real Time Economics - WSJ
EXCERPTS:
"It’s something workers don’t want to hear, but one reason the economic recovery isn’t generating more jobs is that wages are too high, said Robert Shimer, an economist at the University of Chicago.
Speaking on the sidelines of a conference at the Federal Reserve Bank of Atlanta focusing on problems with the U.S. job market, Shimer said a relatively small decline in wage levels of 3% to 5% would result in “significant growth in employment and consumption.” Shimer presented a paper on the topic at the two-day conference on Friday.
One reason this is a particular problem today is the U.S.’s very low inflation rate, said Shirmer. When inflation is high, employers can cut their labor costs simply by stopping or constraining pay increases. When that happens in the face of higher inflation, the cost of employing a worker falls as inflation erodes the value of that worker’s paycheck. One alternative is to offer lower wages to new workers, but that also creates problems, said Shimer. “Companies are reluctant to do that because it creates equity issues.”
“Wages will fall eventually,” which will help revive hiring, he said, but it will take a long time. That’s one reason he predicts the economy won’t return to more normal levels of unemployment, say 5.5%, for “many years.”
“But I really don’t have an answer for the question of how long it will take for wages to adjust,” he said. “It depends on things I can’t foresee — like how much inflation [the Fed’s bond-buying program known as] QE2 will generate.”
COMMENT:
Does this sound familiar? It should. If it doesn't, reread chapter 8 on what happens when the economy experiences a recessionary gap.
"It’s something workers don’t want to hear, but one reason the economic recovery isn’t generating more jobs is that wages are too high, said Robert Shimer, an economist at the University of Chicago.
Speaking on the sidelines of a conference at the Federal Reserve Bank of Atlanta focusing on problems with the U.S. job market, Shimer said a relatively small decline in wage levels of 3% to 5% would result in “significant growth in employment and consumption.” Shimer presented a paper on the topic at the two-day conference on Friday.
One reason this is a particular problem today is the U.S.’s very low inflation rate, said Shirmer. When inflation is high, employers can cut their labor costs simply by stopping or constraining pay increases. When that happens in the face of higher inflation, the cost of employing a worker falls as inflation erodes the value of that worker’s paycheck. One alternative is to offer lower wages to new workers, but that also creates problems, said Shimer. “Companies are reluctant to do that because it creates equity issues.”
“Wages will fall eventually,” which will help revive hiring, he said, but it will take a long time. That’s one reason he predicts the economy won’t return to more normal levels of unemployment, say 5.5%, for “many years.”
“But I really don’t have an answer for the question of how long it will take for wages to adjust,” he said. “It depends on things I can’t foresee — like how much inflation [the Fed’s bond-buying program known as] QE2 will generate.”
COMMENT:
Does this sound familiar? It should. If it doesn't, reread chapter 8 on what happens when the economy experiences a recessionary gap.
Monday, November 1, 2010
60 Minutes: "Fallen Flat" Recovery Has Brought "Anger In The Land"
Lots of interesting interesting examples which demonstrate that in a dynamic, ever-changing economy, businesses and workers often have to make big adjustments, and those adjustments are sometimes very painful for the people involved.
Thursday, September 23, 2010
Wednesday, September 22, 2010
A Tale of Two Economic Recoveries
EXCERPTS:
"We now know the recession ended just as the stimulus money started to get spent. According to the White House's own 100-day stimulus report, issued at the end of May 2009, only $45.6 billion in spending and tax relief had gone out the door by then. In other words, less than 6 percent of the stimulus money was in the economy as the recession ended, making its role in stopping the downward spiral somewhat murky.
This news also makes it harder for Obama to blame President Bush for the nation's current economic troubles.
Obama rightly notes that he was handed a terrible economy. But now we learn that the recession he inherited was just five months away from being over when he took office. So while Obama doesn't own the recession in any way, shape or form, he certainly owns the recovery, which is now well into its 15th month.
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The chart shows unemployment and consumer confidence 14 months after the end of the 1981-82 and 2007-2009 recessions, and average GDP growth for the four quarters following the end of each recession. (Bureau of Labor Statistics, Bureau of Economic Analysis, Conference Board
"We now know the recession ended just as the stimulus money started to get spent. According to the White House's own 100-day stimulus report, issued at the end of May 2009, only $45.6 billion in spending and tax relief had gone out the door by then. In other words, less than 6 percent of the stimulus money was in the economy as the recession ended, making its role in stopping the downward spiral somewhat murky.
This news also makes it harder for Obama to blame President Bush for the nation's current economic troubles.
Obama rightly notes that he was handed a terrible economy. But now we learn that the recession he inherited was just five months away from being over when he took office. So while Obama doesn't own the recession in any way, shape or form, he certainly owns the recovery, which is now well into its 15th month.
"Recession Officially Over," Business Cycle Dating Committee, National Bureau of Economic Research
EXCERPTS:
"CAMBRIDGE September 20, 2010 - The Business Cycle Dating Committee of the National Bureau of Economic Research met yesterday by conference call. At its meeting, the committee determined that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion. The recession lasted 18 months, which makes it the longest of any recession since World War II. Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months.
"CAMBRIDGE September 20, 2010 - The Business Cycle Dating Committee of the National Bureau of Economic Research met yesterday by conference call. At its meeting, the committee determined that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion. The recession lasted 18 months, which makes it the longest of any recession since World War II. Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months.
Tuesday, August 3, 2010
What is the official definition of recession?
According to the Business Cycle Dating Committee of the NBER (National Bureau of Economic Research), here's the official definition of recession:
"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades.
"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades.
Saturday, January 9, 2010
Greg Mankiw's Blog: Unemployment Update
"Unemployment Update"
Interesting graph showing the Obama administration's unemployment forecast versus actual rates.
Interesting graph showing the Obama administration's unemployment forecast versus actual rates.
Monday, January 4, 2010
Uncertainty and the Low Recovery - Gary S. Becker, Steven J. Davis, and Kevin M. Murphy - WSJ.com
EXCERPT:
"In terms of U.S. output contractions, the so-called Great Recession was not much more severe than the recessions in 1973-75 and 1981-82. Yet recovery from the latest recession has started out much more slowly. For example, real GDP expanded by 7.7% in 1983 after unemployment peaked at 10.8% in December 1982, whereas GDP grew at an unimpressive annual rate of 2.2% in the third quarter of 2009. Although the fourth quarter is likely to show better numbers—probably much better—there are no signs of an explosive take off from the recession.
We believe two factors are behind this rather tepid rebound...."
"In terms of U.S. output contractions, the so-called Great Recession was not much more severe than the recessions in 1973-75 and 1981-82. Yet recovery from the latest recession has started out much more slowly. For example, real GDP expanded by 7.7% in 1983 after unemployment peaked at 10.8% in December 1982, whereas GDP grew at an unimpressive annual rate of 2.2% in the third quarter of 2009. Although the fourth quarter is likely to show better numbers—probably much better—there are no signs of an explosive take off from the recession.
We believe two factors are behind this rather tepid rebound...."
Saturday, August 1, 2009
The current recession (Dec. 2007 - ?)
This link is to the NBER's announcement of the current recession. Note the time lag: on December 1, 2008 the NBER is announcing that the economy went into recession in December 2007.
"The Business Cycle Dating Committee of the National Bureau of Economic Research met by conference call on Friday, November 28. The committee maintains a chronology of the beginning and ending dates (months and quarters) of U.S. recessions. The committee determined that a peak in economic activity occurred in the U.S. economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months."
"The Business Cycle Dating Committee of the National Bureau of Economic Research met by conference call on Friday, November 28. The committee maintains a chronology of the beginning and ending dates (months and quarters) of U.S. recessions. The committee determined that a peak in economic activity occurred in the U.S. economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months."
Recession and Business Cycle Dates
The official beginnng and ending dates for past recessions are shown at the link to the National Bureau of Economic Research's site. Wondering what a recession is? According to the NBER, the official arbiter of when recessions begin and end,
"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion."
"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion."
GDP Revisions: Deeper 2008-09 Contraction, Milder 2001 Recession - Real Time Economics - WSJ
"The update moves the current recession past the late-1950s downturn as the worst (in GDP terms) since the Great Depression. (Of course, the 2009 data could be revised next summer so you can’t say for sure.) The BEA now says inflation-adjusted GDP increased just 0.4% in 2008. Earlier estimates had put the growth at 1.1%. GDP is now shown dropping in last year’s first quarter (reported earlier as a gain), posting a smaller gain in the second quarter than shown earlier, a larger drop in the third quarter and a slightly-less-large tumble in the fourth quarter. From the fourth quarter of 2007 to fourth quarter of 2008, real GDP is shown dropping at a 1.9% annual rate compared with the earlier estimate of 0.8%."
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