I stumbled across an interesting piece Economist Arnold Cling posted in August, titled I Love LUCY. Cling argues (persuasively, I may add) that

The NBER’s business cycle dating committee officially stated that the latest recession began in March of 2001 and ended in November of 2001. This approach leads to three characterizations of the recession:
1. It was brief.
2. It was shallow.
3. It is over.

All of these statements are false. The recession was deep, it was long, and it is still underway. Economists and others who rely on the NBER and on indicators such as GDP growth, interest rates, or stock prices have been misled. The economy is weaker than many people realize.

That’s a powerful argument, one I haven’t seen made in the mainstream press. It dovetails nicely with my Frankenstein Economy thesis (which will be out in a few days).

Take this chart, which I have referred to many times over the past 6 months.

Nonfarm Payrolls (% change from recession end)
Nonfarm Payrolls.gif
Source: Chart of the Day, October 8, 2003

It suggests one of two possibilities: either this recovery cycle is unique in the annals of economic history, or (as Cling suggests), it never ended.

UPDATE 10/17/2003 4:22 PM
I contacted Cling to see if his views have changed at all in the intervening time since August; He graciously wrote me back, and noted that the labor market appears to have stopped declining over the past two months. He sounds, well, if not downright optimistic, then at least less negative than before: “I hope the worst is behind us.”

Category: Finance

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2 Responses to “Recession not over?”

  1. nyc99 says:

    Jobless Recovery or Jobless Recession ???

    First I was at Your Job Is Going To India which linked me to: News > Indian software industry buoyed > Signs Of U.S. Economic Recovery Buoy Indian Software Industry > October 17, 2003″ href=”http://www.techweb.com/wire/story/TWB20031017S0007″>Signs Of …

  2. muckdog says:

    Cool blog. I kind of like the secular bear market theory. You’re familiar I’m sure, but basically the idea that the market has 15-20 years of good times, and 15-20 years of bad times, alternating. Within each periods are times of booms and busts, called cyclical bull and bear markets.

    If we’re in a secular bear market, like from 1929-1946 (roughly) or 1966-1982, then we could have had our first cyclical bear market down, and are now in our first cyclical bull market up.

    So while the economy does appear to be mending to some, we’re early in the stages of a longer term bear market (secular!), and at some point down the road will venture back down to DOW 7200…