In November 1973, the first month of a recession that lasted until March 1975, a net 313,000 new jobs were created. In that light, some historical perspective is worth noting. What's more, it's prone to endless revision anyhow. When it comes, recession will not be official until the National Bureau of Economic Research calls it, and that could be backdated by some time. Milton Friedman's "long and variable lags" may just be a little longer and a little more variable. How else were they meant to interpret collapses in bank lending, consumer confidence, industrial production and yield curves consistent with almost every recession in the past 50 years? The Phillips Curve, the once orthodox theory explaining the relationship between inflation and employment, has lost its luster.īut economists and analysts should be cut some slack. It stands to reason their signals were off.įorecasting models based on a quarter century of the 'Great Moderation' - falling market and macro volatility - have been exposed in the post-pandemic world. Patterns of consumer savings and spending, corporate hiring and firing, and business activity in the last few years were not in pre-pandemic models. Trillions of dollars of fiscal and monetary stimulus, the lockdown and re-opening, and inflation pressures sparked by global supply chain disruption and war in Ukraine have distorted all aspects of the economy. The post-pandemic economy is certainly not following the pre-pandemic playbook. The current lag is nine months, approaching the average but still well short of the peak 17-month lag before the GFC.Īgain, if the economy isn't in recession by the end of the year, this time it really is different. The average lead time between inversion and recession going back more than half a century is 11 months. An inverted curve - longer-dated yields falling below short-term borrowing costs - has always preceded recession, as well as giving a couple of head fakes in 19. One of the most reliable recession indicators is the spread between three-month and 10-year U.S. "But we are certainly exceeding the mean and average of these historical outcomes." LONG AND VARIABLE LAGS "Most analysts have no choice but to have their initial bias gravitate to the mean or median range of these leading indicators," he said.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |