One can get an idea of how bad this recession is compared to previous ones at the St. Louis Fed’s Recession Watch. They haven’t They’ve now updated the pictures to account for today’s industrial production release (-1.8% vs. Bloomberg consensus -1.5%)., so I will convey the situation in two graphs. To sum up, industrial production is lower than at the corresponding point in any previous post-War recession. For manufacturing output, the same is true back to the 1973 recession (as far back as this series goes).
Prospects for the U.S. banking system
Some thoughts on the extent of the problem and options for solution.
Recap: The Stimulus Bill and the Macro Impact
CBO has now released an analysis of spend rates of the final stimulus bill to be signed by the President on Tuesday. While the proportions of expenditures and tax cuts are changed, the time profile is little changed from the original House bill — wherein most of the stimulus takes place in the next 19.5 months.
Japanese GDP contracts 3.3% q/q in 2008Q4
Or, 12.7% on an annualized basis. From Reuters:
TOKYO (Reuters) – Japan’s economy shrank 3.3 percent in the fourth quarter, the biggest drop since 1974 and further confirmation that the world’s second-biggest economy is in a severe recession as the global economic crisis deepens.
Projected size of the deficit
It’s interesting that as we discuss the magnitude of the economic problems and proposed solutions, the units everything is quoted in have gone from billions to trillions.
Former Bernanke home in foreclosure
A couple of stories that provide some personal perspective on the scope of the current problems.
WSJ February Survey of Forecasters
The picture says it all. Based on data from the WSJ:
CBO Assessment of the Stimulus Package
As found here:
The Current Downturn: Labor-leisure tradeoff or technological regress
Some views from an economist who is not “advancing the science”.
Reader Joseph commenting on the stimulus bills brings my attention the Cato ad, wherein several Nobel laureates write against a stimulus plan. Ed Prescott is the Nobel laureate who won for work on growth/macroeconomics, so attention must be paid! I looked a bit for his reasoning, and only found this quote from the East Valley Tribune:
“I don’t know why Obama said all economists agree on [the need for a stimulus bill],” Prescott said. “They don’t. If you go down to the third-tier schools, yes, but they’re not the people advancing the science.”
Estimated Output Gap, post Trade, Inventory Releases
The picture says it all, but here’s the quote from RealTime Economics “Fourth Quarter Looking Worse Every Day”:
Yesterday, wholesale inventory numbers came in smaller than expected, prompting economists to revise down fourth-quarter GDP estimates a bit. But a much bigger adjustment is likely in store thanks to today’s data on trade.
The trade deficit for December was wider than anticipated, and economists estimate it will shave up to 0.9 percentage point off of the fourth-quarter number. “These figures were much worse than BEA assumed in preparing the advance fourth quarter GDP estimate,” said Morgan Stanley economist Ted Wieseman, who now expects fourth quarter GDP to be revised down to a 5.2% decline. That figure was in line with other estimates from J.P. Morgan, Macroeconomic Advisers, IHS Global Insight and RDQ Economics, who all expect the number to be around 5%.