Krugman: Recession Over
“The end of the world appears to have been postponed. We’ve had an extraordinarily terrible crisis though we’ve probably hit bottom as world output has turned positive.”
-Paul Krugman, Princeton University
>
A few bullet points from Krugman’s comments in Helsinki:
• The U.S. may have emerged from recession at the end of July or in August
• Growth may be returning after 4 consecutive Qs of negative GDP — the longest contraction since record-keeping began in 1947.
• U.S. has $1.1 trillion in annual capacity “staying idle.”
• The world has become “highly subject” to financial bubbles;
• There was a “remarkable” willingness to ignore signs of the bubble — or more politely, to fail to recognize it.
I believe the NBER made a mistake in the dating of the 2001 recession — they tagged it as over November 2001 — too soon, based on the subsequent employment data. The trough wasn’t for some time.
I suspect we won’t see a similar error this time, and that implies the official mark of the recession being over may be later than many economists (including Krugman) believe.
>
Source:
Krugman Says ‘End of the World Postponed’ as Economy Hit Bottom
Kati Pohjanpalo
Bloomberg, Sept. 21 2009
http://www.bloomberg.com/apps/news?pid=20601087&sid=afZhBPNaXu1o
Tweet
Facebook
Reddit
Digg this!
September 21st, 2009 at 7:29 am
There is one major piece i think all of you economists are missing…. something no one talks about…
Services..
The US is a service economy, our manufacturing base has been declining for years.
Yet, most of our economic reports are based on manufacturing sectors. Industrial production, ISM, home sales, regional fed surveys, etc..
This is a legacy of the recent past when manufacturing was more important. The statistics that we use are based on the economy of 30 years ago.
I think that this recession will be worst in the service industries.. real estate agents, web developers, retail clerks..
There is no question we have seen a bounce in manufacturing, but much of the benefit accrues to the emerging markets which is where america’s stuff gets built these days.
Service industries are full of tiny companies and there are very few economic reports to gauge their health.
So I think we have been sold this idea of green shoots based on a bounce in manufacturing when what really moves the needle in the US is services. And all my work is showing that service industries continue to contract.
This is where the trouble is and the economic statistics based on the economy of the 1970′s are just not picking it up.
September 21st, 2009 at 7:47 am
ISM Services index
http://www.briefing.com/Investor/Public/Calendars/EconomicReleases/napmserv.htm
September 21st, 2009 at 8:01 am
So, when the Christmas shopping season fails, and the second round of mortgage defaults (RRE AND CRE) re-bankrupts the banks and sends housing, land, and commercial building prices to new even more unbelievable lows, and the tax revenues to pay for all of our profligacy dry up due to high unemployment (causing thew government to ? to balance our budgets), that will be an entirely different recession?
Makes sense.
September 21st, 2009 at 8:01 am
of course, but that’s it… a survey of 350 large service firms.
September 21st, 2009 at 8:23 am
The various stimuli like cash for clunkers will throw a head fake about the economy for a Q or 2 but if hiring doesn’t reverse then the downtrend resumes with falling incomes, state & local revs and RE declines – and a stock market blowoff likely when the headfake is recognized
September 21st, 2009 at 11:51 am
Yes state and locals will feel some pain when the stimulus is spent.
Interesting to see Krugman is drinking the Kool-aid after arguing that more stimulus was needed.
What planet or subterranean world does one have to be from to qualify as an economist. They obviously are not leaving their ivory tower to sample the real world.
September 21st, 2009 at 12:52 pm
“I believe the NBER made a mistake in the dating of the 2001 recession…”
There is the recession for the chosen few and the recession for the rest of us. The rest of us don’t count for much anymore.
September 21st, 2009 at 1:05 pm
Krugman is a political whore — er, commentator — rather than an economist. He decried everything as disastrous under Bush, and now that the BO economic miracle is upon us. I know it’s difficult to separate economics and politics, but fer Chrissake, he should at least have truthful labelling. Another example of the irrelevance of the Nobel prize….
September 21st, 2009 at 3:14 pm
“I suspect we won’t see a similar error this time, and that implies the official mark of the recession being over may be later than many economists (including Krugman) believe.”
I think that’s a good point Barry. Everybody assumes that the first positive GDP print will mark the official end of recession. But employment is a significant factor taken into account in this determination (as witness the official beginning marked by the employment drop starting), and just because it’s not been the way they’ve called these in the past doesn’t mean it won’t be this time. If the UE remains as ugly and persistent as most figure it will, it will be quite different than past recessions (though similar to the last) and may be bad enough to warrant a delayed call to the end. And by that time we may get negative GDP again, which will just reinforce the wisdom of such a call.
September 21st, 2009 at 3:27 pm
…ISM Services index includes 370 purchasing and supply executives in over 62 different industries representing nine divisions from the Standard Industrial Classification categories which accounts for more than 80 percent of Gross Domestic Product bottom line results.
September 21st, 2009 at 3:28 pm
Recession: Krugman is over.