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Recession not over?

Posted By Barry Ritholtz On October 17, 2003 @ 11:33 am In Finance | Comments Disabled

I stumbled across an interesting piece Economist Arnold Cling posted in August, titled I Love LUCY [1]. 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 [2]
Source: Chart of the Day [2], 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.┬áHe sounds, well, if not downright optimistic, then at least less negative than before: “I hope the worst is behind us.”

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URL to article: http://www.ritholtz.com/blog/2003/10/recession-not-over/

URLs in this post:

[1] I Love LUCY: http://www.techcentralstation.com/080803B.html

[2] Image: http://www.chartoftheday.com/20031008.htm

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