I see increasing speculation ([1] , [2]) that we might avoid a recession by virtue of having rolling recessions. Usually, the argument is that the slowdowns are hitting different industries, although one could also take a geographical view. Here I discuss both the industry and geographical variation.
First, the conventional view, through the lens of real value added.
Figure 1: Quarter-on-quarter real GDP growth (bold black line), and contribution to quarter-on-quarter GDP growth from real value added by industry (bars). Source: BEA and author’s calculations.
Notice that in the 2022H1 slowdown, no sector was continuously contributing negatively or positively except professional and business services (which includes computer system design and administration). Compare this with the recession of 2007-09.
Figure 2: Quarter-on-quarter real GDP growth (bold black line), and contribution to quarter-on-quarter GDP growth from real value added by industry (bars). NBER defined peak-to-trough recession dates shaded gray. Source: BEA, NBER, and author’s calculations.
Finance, insurance, real estate (FIRE) and rental and leasing led in a big way the downturn, and manufacturing followed.
Now we don’t yet have 2023Q2 disaggregate industry data (9/28 is the next release), so we don’t know the pattern in contributions right now.
Geographical Variation
The expansion has shown a wide variation in growth across BEA regions.
Figure 3: Log GDP in US (bold black), and in BEA regions, all 2021Q4=0. Source: BEA and author’s calculations.
Figure 3 indicates that the GDP slowdown in 2022H1 was concentrated in the Far West, and to a lesser extend New England. The Southwest is growing much faster than the rest-of-the-nation.
In terms of contributions to GDP growth, the Far West is the main component of the 2022Q1 downturn, in an accounting sense.
Figure 4: Quarter-on-quarter growth rate of US (bold black line), and in BEA regions (bars), not annualized. Source: BEA and author’s calculations.
I’m tempted to interpret the big drop in Far West GDP as being associated with the large drop in the contribution from Professional and Business services (which includes computer system design and administration) and Information services. The data support this interpretation, in an accounting sense. Of the 8.0% q/q (SAAR) decline in Far West GDP in Q1, 3.7 percentage points were accounted for by the decline in professional and business services, and information services combined.
Note that the outsize effect of the Far West in terms of contribution to GDP is that it is both large in economic size (as shown in Figure 5), and in this context, variable (as shown in Figure 3).
Figure 5: GDP of US (bold black line), and in BEA regions (bars), mn Ch.2012$ SAAR. Source: BEA.
So as of Q1, the expansion seems to be geographically broad based. That doesn’t mean a shock in one region (or industry) won’t propagate strongly to other regions – saying yes or no to that quesiton relies on a causal model.
Just like there will always be a sunset somewhere on earth; there will always be a downturn somewhere in the economy (somewhere on earth).
We have a diversified economic portfolio. The overall economy is protected from a downturn in any particular sector or region by diversity across sectors and regions.
The fact of leads and lags between sectors – and probably between regions – help us anticipate recessions, but may also reduce the frequency and severity of recessions.
By the way, you heard it here first:
Macroduck
June 8, 2023 at 11:45 am
I’ve heard the expression “rolling recession” used to describe the recent performance of the economy. It’s not a new idea and there is some logic to the idea. A recession involves a widespread downturn in activity. We have been through a downturn in housing which may be resolving itself – job growth and a housing shortage are helping. We are going through a manufacturing and goods sales downturn. Rail and truck cargoes have declined, though not
That old Dylan song “Like a Rolling Recession” was a classic.
“Coined by Loyola Marymount University economics professor Sung Won Sohn, a rolling recession describes a hybrid economy in which industries and sectors essentially take turns contracting, rather than declining all at the same time.”
In my best *Boomhauer voice impression:
“I tell yeh, I tell yeh, it’s those danged Asian furnerz virusizing our ‘Merican com-noonity ‘gehn. When did the liburlz start to allow furnerz to get them Puh-hudz anywayz man?? They don’t dun did hev the right to get no Puh-hudz here.”
*https://kingofthehill.fandom.com/wiki/Jeff_Boomhauer?file=Jeff_Boomhauer.png
pgl,
You asked about the potential for carbon taxes to change the cost of ocean shopping. I’m no expert. Here’s an article discussiong some of the variables:
https://www.morethanshipping.com/fuel-costs-ocean-shipping/
Fuel costs can apparently run to 50%-60% of total shopping costs. Now all we need is a tax rate.
A lot of great data here which I will look at in more detail tomorrow. For now:
How environmental measures affect fuel costs.
The global shipping industry is bracing for a key regulatory decision that could mark a milestone in reducing maritime pollution, but could nearly double fuel costs in a sector already reeling from its worst downturn in decades.
If fuel costs are 50% of total costs, double these costs would increase shipping costs by a multiple of 1.5.
“How environmental measures affect fuel costs.
The global shipping industry is bracing for a key regulatory decision that could mark a milestone in reducing maritime pollution, but could nearly double fuel costs in a sector already reeling from its worst downturn in decades. Did you know? Just one of the world’s largest container ships can emit about as much pollution as 50 million cars. Further, the 15 largest ships in the world emit as much nitrogen oxide and sulphur oxide as the world’s 760 million cars.
To combat such pollution, the International Maritime Organization’s (IMO) Marine Environment Protection Committee will meet in London from Oct. 24th to 28th to decide whether to impose a global cap on SOx emissions from 2020 or 2025 onward, which would see sulfur emissions fall from the current maximum of 3.5% of fuel content to just 0.5%.”
That’s a lot of pollution. Good to hear that the IMO is taking action. Her analysis is informative but one quibble. She is correct that shipping profits had been brutal through 2020 but since the recovery from the pandemic, shipping rates soared as have shipping profits.
OK she wrote this a few years ago:
Fuel Costs in Ocean Shipping
By Elizabeth Stratiotis -January 22, 2018
Shipping profits back then were brutal.
I don’t suppose anyone here noticed Megan Rapinoe missed her penalty kick. Maybe the unselfish thing to do would have been to make room for the next generation of women to develop, instead of contributing to a culture which says narcissism is always the correct route?? If you see a person obsessed with themselves, who spends more time talking about their own public image than the game itself, is that a good example for the younger players?? Then she can’t even manage a penalty kick??
Great legacy. Maybe Rapinoe can try Rudy Giuliani’s runny hair dye for the next early exit. Seems it would match the field results.
I watched every second of that match. While I’m a major Rapinoe fan – that was her worst game ever. She mucked up a play where a perfect pass set up her up for a goal well before the penalty kicks. And her 3 corner kicks were not well delivered. With that said – please do not act like Donald Trump. Trump would not know what a soccer ball was if someone kicked it right below his fat waist line.
Nyaaaa Nyaaaa
https://www.nytimes.com/2023/08/06/sports/soccer/megan-rapinoe-womens-world-cup.html
August 6, 2023
For Megan Rapinoe, an Ending Not Even She Could Have Imagined
A missed penalty kick was a cruel way to draw down the curtain on a star’s World Cup career. But her influence and legacy were never about soccer alone.
Megan Rapinoe after missing a penalty.Credit…Hannah Mckay/Reuters
By Jeré Longman
It ended in the most excruciating way for Megan Rapinoe: a penalty kick skied over the crossbar, shock, disappointment, a rueful smile to herself.
“It’s just like a sick joke to miss a penalty,” Rapinoe said after the United States was eliminated, 5-4, on penalty kicks after a scoreless tie with Sweden on Sunday in the round of 16 at the Women’s World Cup in Melbourne, Australia.
Rapinoe could not remember the last time she missed a penalty kick. She was sent on as a substitute late in Sunday’s game because she was so reliable. It was her penalty kick that provided the decisive goal in the final of the 2019 World Cup. This time, accuracy betrayed her on a night when age and injury showed in her legs.
There is more soccer to play for Rapinoe, a National Women’s Soccer League championship to chase in Seattle with the OL Reign. But her retirement, announced in July, will arrive this fall at age 38. The light of Rapinoe’s renowned and polarizing career as a player and activist has now gone into shadow on the World Cup stage, where she played her best and emphatically spoke her mind.
She was a defining athlete of her generation, one of the first publicly gay players on the women’s national soccer team; a ruthless and creative forward who delivered in the most tense and revealing moments; a self-described “walking protest” who jousted with a president, knelt for the national anthem and fought for equal pay and equitable treatment on L.G.B.T.Q. issues with what Julie Foudy, a former national team captain, has described as a willingness to “boldly disrupt.”
After Sunday’s game, Rapinoe joked with reporters but tears also came into her eyes.
“Well, now that I’m 38 and in therapy, I was like, ‘This is life,’” she said. Of course, she wished the United States was still competing for a third consecutive World Cup title. Of course, she wished there was at least one more game to play. But, Rapinoe added, “I feel like it doesn’t take away anything from this experience or my career in general.”
During the 2019 Women’s World Cup, Franklin Foer, writing in The Atlantic, called Rapinoe “her generation’s Muhammad Ali,” who like the heavyweight boxing champion also became a “hero of resistance” with “sly humor and irresistible swagger.” …
Nice tribute. People are forgetting that the US would still have won if not for the fact that 3 of the next 4 penalty kicks were mishits. This was not Megan’s fault solely.
Plus the US goalie stopped the last Swedish kick and swatted it away. The ref called no goal. But the Swedes begged to bring in the cursed VAR. In my view – the winning kick was not a goal. But what do I know? I actually played soccer.
“There is more soccer to play for Rapinoe, a National Women’s Soccer League championship to chase in Seattle with the OL Reign.”
I’m glad to heae that. I’m not sure if she will have some of those magic moments old man Messi is having in Miami but I hope so.
Seems like you’re not very confident about her future??
I had thought she retired last year – so no.
https://www.nytimes.com/2023/08/06/sports/soccer/megan-rapinoe-womens-world-cup.html
August 6, 2023
During the 2019 Women’s World Cup, Franklin Foer, writing in The Atlantic, called Rapinoe “her generation’s Muhammad Ali,” who like the heavyweight boxing champion also became a “hero of resistance” with “sly humor and irresistible swagger.” …
[ Imagine such cruelty:
https://econbrowser.com/archives/2023/08/a-rolling-recession-from-a-rolling-expansion#comment-303038
August 7, 2023
“Great legacy. Maybe Rapinoe can try Rudy Giuliani’s runny hair dye for the next early exit. Seems it would match the field results.” ]
1. Lots of people miss penalty kicks, see below. 2. She’s not the coach who decided to put her in. A *LOT* of the postmortem focuses on a whole series of poor coaching decisions, of which this was (possibly) just one. 3. Two U.S. players never got on the field in the four games at all (the coach’s decision); it wasn’t like she *had* to play or the U.S. would be a person short or anything.
“The odds leaned back and forth during the kicks, with both Sweden’s Nathalie Björn and the U.S. star Megan Rapinoe missing their shots, which started a string of four-straight missed kicks. After Sweden’s Rebecka Blomqvist shot was saved, U.S.’s Sophia Smith missed her shot.”
That Sophia Smith missed her shot was what broke my heart. Both goalies were off the charts. The Swedes owe the win to their goalie, a lot of luck, and in my view a horrible decision to have the last kick be counted as a goal.
I never missed a penalty kick. My team did not let me take them. Now I had a wicked corner kick technique but not quite as good as what that Irish girl did!
… also, “During World Cup 1982 to 2018, the conversion rate is surprisingly low at around 70%”, from Northwestern University.
In my day – the conversion rate was 90%. If Ronaldo is taking the penalty kick, bet the ranch it will be a goal.
Apparently it is higher in league play, a little over 80% in Europe. Goalie quality?
From Ritholtz a link to this on inverted yield curves:
https://disciplinefunds.com/2023/07/18/what-does-an-inverted-yield-curve-tell-us/
“So, an inverted yield curve is not really predicting recession. It’s predicting that the Fed will reduce rates in the future because inflation is likely to be lower than it presently is”.
That is about the best explanation I have ever seen. Sure predicted rate reductions has in the US been highly predictive of a recession. However, this time is indeed different, with the Feds rate changes predictably chasing inflation up and down a supply constraint “index”/curve.
negative term risk….
everyone in the long side is speculating……. at least in the short term!
the bet is “anything to avoid recession in spring 2024.”
my view is the long end is dangerous, betting low interest beyond near term is a bet against the $.
This is a perfectly good perspective, but will only be validated after the fact. Recessions are pretty good at reducing inflation. Demand suppression and all that. History shows that threading the needle between reducing inflation and avoiding recession is pretty tricky.
If the Fed cuts rates because inflation reaches target without the economy tipping over into recession, there will be general applause. Some of us, though, will want to know whether rate hikes were all that necessary to bring down inflation, if demand suppression wasn’t a big part of snuffing out inflation.
Certainly, continuing to hike rates when inflation has already been halved, and the full effect of most of the hikes hasn’t yet been felt, seems a bit much.
I’d like to hear Fed folk tell us, in detail, what operational theory they are using to guide policy these days.
I completely agree that the Fed action was not justified by inflation. It is actually so basic Econ101 not justified, that I am leaning towards the idea that they decided not to let the opportunity of a disaster go to waste. They knew that their rate hikes and asset selling would not have much effect on inflation – why else would they continue with it way past the peak of inflation. However, they always wanted to get rates and the Fed balance sheet back to something more “normal” and the supply line driven spike in inflation was a good excuse. That would also explain why they hiked rates so fast, without waiting to see the “effects” of previous hikes. They knew their excuses would soon run out of steam so better get it done before. It is still possible that their overdoing it will induce a very short and shallow recession, but they will have room/tools to deal with that. So the track record of the categorical parameter of “inverted yield curve” preceding the categorical parameter of “recession” may still be saved.
Pretty good link, but the 2010 reference looks like it was written by a couple gargoyles er something. Have you ever heard of those two researchers/academics before??
This is interesting:
https://www.google.com/amp/s/amp.cnn.com/cnn/2023/08/08/investing/italy-bank-windfall-tax/index.html
It’s not obvious to me why this only applies to banks.
“Italy dealt a surprise blow to its banks and sent shockwaves across the sector in Europe by setting a one-off 40% tax on profits reaped from higher interest rates, after reprimanding lenders for failing to reward depositors. Sharply higher official interest rates have yielded record profits for banks, as the cost of loans soared while lenders held off paying more on deposits.”
Higher interest rates not accruing to depositors? Now where is JohnH on this one? Maybe he would make that windfall tax rate closer to 100%. Of course if Russian banks did that – JohnH would call that good business.
Speaking of recession, rolling or otherwise:
http://www.cnbc.com/amp/2023/08/08/china-reports-double-digit-plunge-in-july-exports-and-imports-missing-expectations.html
Import and export data are commonly used to develop proxies for Chinese output data, because they can be compared to corresponding trade data from other countries. Interesting to see what forecasters outside of China do with these trade stats.
Kevin Drum had a related post on this.
https://twitter.com/Brad_Setser/status/1688914711247728641
Your astute question is obviously still valid, just wanted to pass on.
Ukraine has responded to Russian attacks on export infrastructure by warning that it may attack shops carrying Russian cargoes in the Black Sea:
https://www.politico.eu/article/ukraine-declares-war-on-russia-black-sea-shipping/
The article notes a sharp rise in insurance rates. That is one of a handful of factors likely to boost food and fuel costs. Shipping costs outside the Black Sea may fall as vessels look for cargoes elsewhere. India and China will face higher energy import costs, and perhaps turn to oil from elsewhere.
Much of the actual economic impact depends on how effective Ukraine is in reducing Russian shipping. Of course, Russia could respond by rejoining the Black Sea grain deal. I wouldn’t bet on it, but what do I know?
I’m interested to see how Turkey responds. Erdogan is obviously opposed to Russia exercising hegemony over the Black Sea. He wants navigation to be as normal as it can be.
Lots of moving parts on this one. The one thing that enters my mind is~~I don’t think Zelenskyy is the type to say it if he doesn’t mean it, i.e. is willing to back it up with action. If he can make the ships inoperable without spilling oil into the ocean (environmental damage) why wouldn’t he?? I think with drones etc it would be very easy to make the ships inoperable without spilling oil.
I think the Zelenskyy threat is going to come to fruition, and call me warped in the head, but I can’t wait to watch it.
This is soooo racist:
https://www.sciencealert.com/ancient-skull-found-in-china-is-unlike-any-human-seen-before
I suspect this is DeSantis’s wife’s influence. Musical chairs is not a good way to run a national campaign, and the man can’t get up to use the bathroom without asking the wifey first.
https://www.politico.com/news/2023/08/08/ron-desantis-replaces-campaign-manager-00110253
The problem is not the campaign manager. The problem is~~how much the campaign manager defers to Ron’s wifey on every campaign decision under the sun (which is what all of DeSantis’s campaign managers will HAVE to do to keep the job). They’ll very likely fire the next campaign manager before the end of calendar year 2023. The biggest problem for DeSantis (other than kissing the bottom of his wife’s feet every night) is he has the interpersonal skills with common Americans that Hillary Clinton had/has with Black people.
https://www.politico.com/story/2016/09/hillary-clinton-florida-black-voters-228822
Former Harvard Law School professor Alan Dershowitz said Special Counsel Jack Smith “could be himself indicted” for omitting a portion of Donald Trump’s “peaceful” rhetoric during a January 2021 speech under his own “fraud” standard, RadarOnline.com has learned.
https://www.msn.com/en-us/news/politics/jack-smith-could-face-criminal-charges-over-trump-indictment-alan-dershowitz-claims/ar-AA1eUUO8
WTF? Is ALAN getting jealous that John Lauro and Jonathan Turley are getting more attention than this HARVARD professor? For someone who pretends to be brilliant, this is beyond STUPID.
Dershowitz argues that Smith has an obligation to include something in an indictment which doesn’t provide evidence of an indictable offense?
That’s a pretty odd claim. Perhaps Dershowitz thinks math books should include poetry and sheet music should include pictures of insects. The defense has every opportunity to introduce exculpatory evidence. Smith isn’t required to do so. Dershowitz is sounding more like Trump all the time.
Hmmmmm……. Desperate times call for desperate measures. Poor DeSantis had to run to the dirty liberals for a spotlight. Did he run “talking to the enemy” by his wifey for approval first?? Ope!!!! No “horizontal refreshment” for Ron that night.
“This week, for example, DeSantis did an interview with NBC News just months after a top spokesperson in office said they were boycotting the network.”
Farther down in the same Gary Fineout authored article:
While brushing aside some of his poll numbers, DeSantis told NBC News this week that “I would much rather be underestimated” when asked about some of the problems with his campaign so far.
Ron baby, “underestimated” is not your problem. Ron baby, your problem is you are being very accurately estimated.
Hey Everyone!!!! I have “big news”!!!! Steven Kopits finally has a reason to switch his devotion to Putin over to the Ukrainians!!!
https://www.politico.eu/article/ukraine-declares-war-on-russia-black-sea-shipping/
Many deep and enduring love stories do come to an eventual end. Will Kopits leave Putin a final love note on the bedside table, telling him Zelenskyy is his new lover?? Stay tuned……
Steven Kopits finally has a reason to switch his devotion to Putin over to the Ukrainians!!!
Many deep and enduring love stories do come to an eventual end. Will Kopits leave Putin a final love note on the bedside table, telling him Zelenskyy is his new lover??
[ The evident need is to ceaselessly try to destroy people, and to repeatedly use psycho-sexual attacks in so trying. ]
You do know Stevie hates the PRC. Is that OK with you?
@ ltr
Why are you trying to distort what I have described as a poignant and timeless Shakespearean love story between Kopits and Putin~~into the inverse~~a used version of “Hustler” magazine sold on the streets of Shanghai??
uss gerald r ford was “port call” in Athens last week. I think the first deployment for the new class of us navy nuclear aircraft carriers.
three of the battle groups guided missile destroyers are detach to 2 U.S. navy amphib/dock ships toting 700 marines thru the Red Sea to deal with iran and shipping in the Persian gulf.
I doubt the marines will go to Niger, but you never know, too far inland…
uss ford is protected by usaf land based fighters in the eastern Mediterranean as well as the other 2 carrier group in the ‘med’.
“the argument is that the slowdowns are hitting different industries”
Wait – whatever happened to shifts along the production possibility frontier. We have seen a very significant increase in construction investment for businesses. So one would expect some other sector such as residential investment to be crowded out by say a rise in real interest rates. The fact that the latter sector is shrinking is not a recession by anyone’s definition.
Or let’s go back to the late 1960’s when defense spending spiked. I would imagine we would see other sectors shrinking a bit. Now I do not recall the 1967/68 recession. Then again I bet Princeton Steve had some comment describing 1968 as a recession year.
For those who like to keep a peripheral eye on Europe, or maybe just curious how they handle issues differently than the USA:
https://www.politico.eu/article/not-another-american-meet-the-new-favorite-for-eu-competition-economist/
Apparently Americans being candidates for EU jobs nauseates them. Who knew??
The outcome of higher insurance rates for Black Sea shipping is less export income and higher import cost for Russia. I doubt the West would allow Ukraine to completely stop Russian Black Sea trade even if they could. The idea is to reduce Russias income substantially without increasing world market prices by a lot.
By destroying grain shipping facilities in Ukraine Putin has actually cut out the possibility of resuming the Black Sea grain deal – even if he wanted. There is nothing in it for Ukraine and the West anymore. Sure allow Ukraine to ship grain out of the Black Sea, which they can’t.
This was another huge blunder by Putin who played right into the hands of the Biden administration. Putin never realized that it was in the interest of the west to stop the grain shipping deal but have the blame clearly land on Putin. Now if Putin comes back and want the old deal revived he may have to make additional confessions. He would still be unlikely to get a commitment from Ukraine to not attack ships going in and out of Russia – unless he allowed similar unrestricted passage of all traffic to Ukraine. The increased shipping cost for Ukraine will be covered by the West, who will cover it for Russia?