From Washington Post:
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“It does look like a great eight years, aside from the last quarter, unfortunately,” Edward P. Lazear, chairman of Bush’s Council of Economic Advisers, said in a recent interview. “In the long term, things look good. The reason things look good is this economy will rebound, and it will rebound strongly. . . . We expect things to turn around, and I would say early in President Obama’s administration.”
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Paul Kedrosky has observed that a statistical analysis (word cloud) of the American Economic Association session titles, or even of the papers, leads to the impression that the economics profession has been relatively uninterested in the ongoing financial and economic crisis. Unfortunately, this observation misses ignores the fact that session proposals are submitted a full eleven months ahead of the ASSA meetings. Think back to January 2008, and the terms ascribed to those who warned of a severe slowdown (“alarmist”, etc.), and the whole discussion is cast in a different light.
Yes, I saw the discouraging headlines. But I also see signs of hope in last week’s economic news.
By way of Paul Krugman, here is the estimated impact on employment provided by C. Romer and J. Bernstein.
There’s been a lot of discussion about how the lack of “shovel-ready” infrastructure projects puts a constraint on government investment spending as a mode for delivering stimulus, since most infrastructure projects take a long time to plan and build. But what if the negative output gap is going to be deep and long-lived? Is this concern so pertinent? I don’t think so.
From Bloomberg:
The U.S. lost more jobs in 2008 than in any year since 1945 as employers fired another 524,000 people in December, indicating a free-fall in the economy just days before President-elect Barack Obama takes office.
The CBO released its Economic Outlook today. Here’s its projection of the output gap, under current law.
On a seasonally adjusted basis, U.S. light vehicle sales remained deeply depressed in December. But at least things don’t seem to be any worse than they had been the previous month.
The description of the consensus that growth will resume around mid-year — while accurate — does not convey much information about what is the consensus regarding the depth of the recession. Nor does it convey the degree of disagreement regarding the timing and strength of the recovery. To provide some insight , here is the mean forecast for GDP into the new year, according to the WSJ’s December survey.
In my previous post, I presented evidence that the oil price increase over 2007:H2-2008:H1 made a significant contribution to the slowdown in consumption spending in general and decline in spending on domestic automobiles in particular. Here I discuss why this should be regarded as a key development that turned the slowdown in growth into a recession.