Source: A Double Recovery? Dr. Ed’s Blog, January 17, 2012


Dr Ed Yardeni (who is an all around nice guy) points to the following bit of history, and concludes strong economic recovery is in the offing:

“Real GDP is up 5.5% from the recession trough during Q2-2009 through Q3-2011 to a record high of $13.3 trillion. That initial recovery was roughly half as strong as the average gain of 9.8% over the same period during the past seven recoveries. Since the official start of the latest recovery during July 2009, payroll employment is up only 1.1%, significantly lagging the average 5.1% gain of the previous seven recoveries over the same length of time–though it is on par with the last two “jobless” recoveries.

In the past, recessions were followed by one, not two recoveries. This time, key sectors of the economy haven’t participated in the initial economic rebound, but finally may be on the verge of doing so. The second recovery could take off as the pace of hiring quickens, housing activity finally picks up, auto sales head higher, and state and local governments stop retrenching. If so, then the US would finally enjoy the benefits of a broader-based recovery (emphasis added).

I have a somewhat different take: I see the weak recovery as typical of other post credit crisis recoveries. The anemic numbers reflect the inability of the Fed to jump start activity through making borrowing cheaper.

The risk from here is that activity is so soft that it wouldn’t take much to push us back into a recession. Hence, we are pretty aggressively invested, but I am looking for signs that this market is getting tired.


Employment chart after the jump


Category: Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

33 Responses to “Yardeni: US Economy on the Verge of a Big Comeback?”

  1. BennyProfane says:

    Such a simple way to look at things. Avoids any sort of criteria specific to this time. Just, well, been down so long, it’s gotta be up from here thinking. Remember the V shaped recovery argument? How’d that turn out?

  2. me says:

    Hey Dr. Ed, where are the jobs? You mean the burger flipper jobs? Maybe he should read today’s WSJ and, just as I have been saying for years, research jobs are now created overseas, not the US.

  3. CANDollar says:

    One of Nassim Taleb’s ideas can inform this.

    Isn’t the economy showing what he would call “fragility” and a “lack of robustness” implying the potential that a shock – say oil spiking, or some sort of CDS mess could really derail growth potential or ignite recession?

    A key source of this fragility may be the US consumer who is dipping into savings, which are meagre to begin with, and lowering savings rate, expanding personal debt, to consume?

  4. me says:

    Kathleen Madigan says its the warm weather distorting seasonal adjustments, payback coming in the spring.

  5. DeDude says:

    Show me a realistic path to increased consumption rather than a dumb-math “this is how it usually work” story. It is always somewhat different every single time; so you have to have an underlying model that takes those differences into account.

    The only thing that has any chance of significantly increasing our GDP is an increase in consumer spending (which is 70% of the GDP). The consumer class can increase its spending either by increased borrowing or by increased income. Neither of those two things is likely under the current conditions and congressional gridlock. Now if the Fed decided to print and send everybody (with a legal social security number) a brand new $1000 bill (i.e. bail out the consumers not the banks), then we might begin to unlock the current problem a little – but I wouldn’t hold my breath waiting for that kind of novel imaginative initiative from the current bunch. Instead I would bet on slow deterioration interspersed with a few desperate hail Mary QEx passes (that will do more harm than good because the money get into the wrong hands).

  6. econ scott says:

    LMAO !!
    Yardeni is a clown. Every macro call he has ever made has been proven wrong.
    1- he said Y2K would start a world wide recession
    2-he was the poster boy for labeling Internet CEO’s in 1999 as people who “get it” vs bricks and mortar CEO’s and that we should buy Nasdaq stocks
    3- he said in 2005 that we should buy land – ” they are not making any more of it”
    Why does anyone listen to this clown anymore?

  7. rob says:

    Barry: I’d like to take to task DeDudes comments. (Not picking on your DeDude, cause you bring up some good points) What I’m curious about is the old bantered “70% of GDP” as I’m wagering that number has significantly decreased since 2007 which was the last time I actually saw any data backing it up. So, is 70% still accurate? Also, “the consumer class can increase its spending either by increased borrowing or by increased income. Neither of those two…” I’d offer that there’s a third. I can have zero income increase and zero borrowing, but if my disposable income ratio changes due to debt reduction, then I have more money to spend. I’m thinking this is the end game they are going for, walking sideways while deleveraging, until debt load is reduced sufficiently to allow spending again. 3 years I would say is a fair amount of time for this to occur. Eh, just my two cents.

  8. albnyc says:

    I’d like some of what Dr. Y is smoking.

  9. econimonium says:

    I’m going to expand on rob’s post. If people can reduce debt, or reduce the payments they make on that debt (like refinancing their house) then it is possible to walk sideways for quite some time which is, actually, recovery just not positive slope curve recovery like people who look at charts like to see.

    Furthermore, the jobs picture is actually quite complicated and nuanced. But there is one area that would cause a rather large uptick in economic activity: construction. Housing looks like it is now on the upswing, as well as commercial spending and manufacturing is also doing better. All the numbers are starting to look like what happens when you recover the aircraft from a steep stall. You’re not out of danger, but the nose isn’t pointed to the ground anymore.

    So this mostly permabear is actually guardedly optimistic. I have increased hiring plans for my business (both the one I run and the one I own) for this spring. I haven’t hired in two years. I know others who have the same plans. So in the next 6 months I’m going to say that things are going to start looking a lot brighter. Right in time for the election no doubt.

  10. Pantmaker says:

    “Big comeback?” Reminds me of a joke about a guy with really small hands-

    Hussman this week-

    “Of course, it’s possible that the downturn we’ve observed to date will quickly reverse to a new growth path, but we should keep in mind that GDP is just the sum of consumption, real investment, government spending, and net exports, and then ask what will drive that reversal. Have the credit strains in Europe been durably addressed? Can European economies presently be expected to expand? Is there now less need for fiscal restraint in the U.S.? Has the overhang of troubled mortgages in the financial system been worked out? Have savings rates rebounded or pressure on household budgets eased? Is consumer demand is sustainably rebounding? Is there pent-up demand for capital goods despite having drawn spending forward due to expiring tax credits last year? Are exports to the rest of the world expected to accelerate? Are profit margins likely to expand from already record levels in order to accommodate growth in corporate profits? Do companies expect demand to be strong enough to commit to large-scale or multi-year investment projects? Not all of these factors have to reverse in order to have a sustained expansion, but the headwinds don’t appear light.”

  11. me @ 13:26..

    see some of..

    “Bakken Shale Boosts North Dakota Jobs”

  12. sabre_jenn says:

    This reminds me of Goldman Sach’s puppet … I mean Treasury Secretary Tim Geithner blabbering endlessly about the 2010 Summer of Recovery

    If only we steal another $700 billion from future generations, employment won’t go above 8%!! Of course, we will call it “borrowing” $700 billion, but borrowing implies we will pay it back ourselves. In truth, we have stated clearly our intention to roll the debts over and stick younger generations with the bill. While national unemployment is now down to 8.6% (is that above or below 8% Mr Geithner?), unemployment among younger generations — those that will actually have to pay for the endless bailouts — is almost 20%.

    Yardeni has had way too much spiked Kool Aid

  13. mathman says:

    This is happy talk, since:

    US recovery at risk as Americans raid savings, borrow again


    Nearly Half of U.S Lives in Household Receiving Government Benefits.

    haven’t changed. In fact, when they do change a little later this year, it’ll probably be for the worse. Without jobs that pay at least a living wage, most of which have been outsourced or discontinued, the results this so-called economist is touting, are fictitious. The housing/mortgage situation hasn’t gotten any better either, just to remind him.

  14. DeDude says:


    I am glad you have a different opinion; that is what debate is about. People bring out facts. Laying out different ways to interpret them is about the most productive thing we can do here.

    With respect to the 70% I think that you will find the latest numbers are not “significantly” different. Look at Table 1.1.5 line 1(GDP) and line 2 (Personal consumption) for 2009 – 2011 Q3 at this link

    Actually your 3’rd way is technically just a shift in consumer spending (not an increase). You are talking about shifting your spending from interest payments to something else. For the calculation of current GDP your spending a $ on interest is no different from spending it on a new car. But for the growth of the economy it is probably better that you spend it on a US made product than on paying banks and banksters more (increasing their profit margin). That gets into the issue of how big a multiplier effect certain types of spending has compared to other types of spending. However, to get to lower spending on interest by debt reduction, you first have to reduce your spending (using the saved money to pay back debt) and that is very bad for the economy (although it is good for you personally, and in the long run also better for the economy). To compensate for your lower spending, the government either have to accept a contracting GDP (recession) or increase it’s spending to compensate for the reduced private sector consumption.

  15. Molesworth says:

    Econ Scott wrote:
    Yardeni is a clown. Every macro call he has ever made has been proven wrong.
    1- he said Y2K would start a world wide recession
    2-he was the poster boy for labeling Internet CEO’s in 1999 as people who “get it” vs bricks and mortar CEO’s and that we should buy Nasdaq stocks
    3- he said in 2005 that we should buy land – ” they are not making any more of it”
    Why does anyone listen to this clown anymore?
    * * *
    Never heard of Yardeni but if EconScott is right, one should watch for what Yardeni says and do the opposite, eh?

  16. jd351 says:

    I agree with DeDude 100% I have always said this, which by the way is common sense.

  17. Marc P says:

    Yardini’s analysis should take government spending into account. He says ?Real GDP is up 5.5% from the recession trough during Q2-2009 through Q3-2011 to a record high of $13.3 trillion.”

    Let’s do some quick math. The federal government spending has gone from $2.7 trillion in 2007 to $3.8 trillion this year (from memory). That’s a $1.1 trillion increase. Seems to me the 5.5% increase in GDP he brags about is nearly all coming from increases in federal government spending. This is a recovery only if we define “recovery” as increases in the GDP number, rather than defined by the health of the economy. Not quite the recovery I have in mind.

  18. bear_in_mind says:

    In the ‘REAL GDP’ graph, the only weaker rebounds were ’80; and the first five quarters of ’91 and ’01. The ’80 rebound resulted in a double-dip, while the other two laggards were injected with fiscal steroids by the Federal Reserve… and they still limped along relative to average. The ‘PAYROLL EMPLOYMENT’ graph shows dang near the same pattern.

    These suggest a structural economic shift now recognizable in the data beginning in the early-90′s, but currently exacerbated further by numerous macro factors (i.e. bailouts, indebtedness, dollar weakness, employment outsourcing).

    About the only confidence I share with Yardeni is that this will change over time, either due to politics, deflation, inflation, employment, technology, war, etc. However, I’m not about to venture a crystal-ball guess when or how that change will occur. Likewise, determining how these macro issues impact the casino is akin to playing at Whack-A-Mole. Wouldn’t be surprised to see HFT push the market into new all-time highs before another 40 percent plunge — any more than I’d be surprised to see a 15 percent trading range over the next 3 to 5 years.

  19. bear_in_mind says:

    Oops… hit the wrong key before finishing my thought:

    “…injected with fiscal steroids by the Federal Reserve… and they still limped along relative to average” — that is until the BUBBLE from misallocated capital burst and presaged the two subsequent recessions.

  20. kris says:

    If anybody knows who funds Yardeni’s paychecks, let us know. It would be immediately clear who is interested to spread out rumors like his writings. It’s more propaganda than economic research.


    BR: He owns his own firm, sells his research to Institutions, and lives and dies on the strength of his calls

  21. Frwip says:

    Yardeni is a bit of a joke, innit? Big comeback?

    I don’t think so, not without a huge expansion in credit or disposable income at consumer level and I don’t see how any of that could happen. Credit is just not gonna happen, period, never, not for at least another 30 or 40 years. 2008 wasn’t 1929 but people still got zinged something and will remember it for a long time (and their kids too). A big shift in income would require an enormous redistribution effort on the scale of the 40s. Politics may be starting to lean in the right direction for that but not in 2012, nor anytime soon (save a revolution or a world war of some sort).

    I’m mostly with Rob and Econimonium. Cautious and measured optimism, of a slow, halting recovery but recovery nonetheless amid a continuing steady deleveraging all around. It may back slip at times but not by much either as

    The back story is that most of the big piles of horse manure have already hit the wind turbine and are already factored in. To go Keenian, I’d say that the huge negative credit impulse of 2007-2010 is now in the past and its effects no longer dominant on the economy, and there is no potential for a further huge negative credit impulse. There’s simply no big leverage out there primed for a sudden collapse. So it’s back to normal, income-driven (rather than credit-driven) consumption patterns.

    That being said, the actual deleveraging is going to take more than those past 3 or 4 years, given how high the pile was built in 2002-2006. It’s going to take another 5 to 10 years to clear up the wreckage. Getting there, a third of the way through and not done yet. Keep going.


    Taleb is probably too bleak. Yes, there may be some monster lurking somewhere but the biggies, Europe and China, are already clearly visible and, if not fully accounted for, at least largely anticipated. People know about it and if the biggies go down hard, it won’t be a surprise. You won’t find of a lot of investments and outstanding commitments predicated on 15% growth in China and suddenly left to hang dry in case of a hard crash over there. The economy is already fearful and that’s the saving grace.

    Regarding oil, probably not that much of an issue. Prices are already very high and it’s already baked into the current economy. Oil going from $100/bbl to $140/bbl is far less harmful than oil going from $20/bbl to $50/bbl because the economy is already configured for high oil prices, after 4 years already of mostly high oil prices. Again, a matter of “Keenian impulse”, if you will.

    As I wrote earlier, ” 2012, the Year of Meh, Mostly “.

  22. kris says:

    The only reason we are not in full blow depression is due to the US Military making sure all goods safely go from point A of the globe to point B of the globe. The main reason the great depression of the 30s occurred is due to trade barriers between countries and there was no world superpower to guarantee trade movements on land, sea and air. As to recovery, nada, zilch, we never got out of the recession. The real income is lower and lower every year. How could there be a recovery at all Barry?


    BR: 1. I have no idea what you are referring to with the military
    2. Your explanation for the Great Depression is rather wanting
    3. As to the recovery, by any fair analysis of the data, the recession ended 2 years ago.

    Sorry if these do not conform to your preconceived notions, but that’s the way it is.


  23. Rightline says:

    whether you agree with this (or previous calls) or not, I find it very surprising how many here don’t know who yardeni is. i’d love to know the demographics of the readers and posters here these days.

  24. kris says:

    Thx a lot Barry for taking the time to answer. You just confirmed what I thought.

  25. kris says:

    You may have a point.
    I’ve read about so much about “specialists” and knowing who this or that guy or gal is, that I frankly do not want to know any longer. Only gents like Barry that accept and always assume that they may be wrong, are worth reading. As Barry said, he lives and dies by his advises to the institutions. And as Barry commented on another blog with his typical (misleading) sarcasm, verbatim ” …just as everyone knows that bank execs would never blow up their own firms!”. Pure lethal sarcasm!

    I’m 39 years and 3 months young.

  26. Frwip says:


    If only ….


    Yardeni’s argument breaks down right off the gates because he doesn’t show where demand is coming from. And comparison with “the past seven recoveries” is pretty pointless given that the causes of the current recession have little to do with those of the past seven recessions (well, may be the case is not so clear with 2001-2003). For guidance, you have to look at the 1930s or even the “Long Depression” of 1873-1896.

  27. Rightline says:

    i’m 49, i don’t follow yardeni or anyone else particularly, this is one guy’s opinion, i take it as presented with the hundreds of other data points and opinions i filter every day, imo some are over emphasisizing this call, my point was surprise of how many are unaware of who yardeni is, he has been on (and off) point several times in the past, some call him a loon for the y2k rants, others credit him for raising awareness, i do know in 05/06 and early 09 he was very bullish, i will even pay attention to what biryini says and appropriately filter that as well…

  28. econ scott says:

    I am 46- and a little bit of a Econ cycle junkie – it is interesting how herd mentality can take over anything – I am old enough to remember the cries of 1991 recession and that we were going to be the first generation worse off than our parents – then came the Internet – jobs and off course greedy internet Bubble- dismal again- the real estate bubble- now what ? If Europe doesn’t take care of business then we are all doomed – so I wil guess they will debase completely lest risking revolution- so then it will be unites states turn to debase – dollar index is going to 50- deflationists are wrong – Deflation experts like Paul krugman and Steve Keen ( sydney) and Mike Shedlock are brilliant in their analysis but they don’t understand that centrals banks will fry their currencies before they risk that

  29. econ scott says:

    I am 46 and was an undergrad econ chump at Berkeley which should disqualify me immediately. Always amazed how the Ed Yardenis and Diane Swonks of the world get so much airplay. This article is interesting and I am glad Barry brought it to my/our attention!
    But Yardeni is out to lunch yet again. This is not a normal recession. This is an output gap recession. We are so far behind the curve on GPD and jobs it is not even funny. They will come ( no one thought they would come in 1991- i remember how everyone thought we would be the first generation worse off than our parents- but then jobs came via the internet) ….jobs will come….. but we have a while to go.
    The belief that market have ” already discounted that” will come to an end. So funny really. If the jobs are coming why is the 30 year at 2.85 on its way to 2.00
    My suggestion is don’t try to predict like Yardeni- can’t be done on this one. Output gap is here and the Fed already is saying the may target NOMINAL gdp. Just think for yourself what that means. I know it means a portion of economic theory is being rewritten in REAL TIME.

  30. duaneteddy says:

    I wouln’t believe anything Yardeni says. He was a complete denier for a long time that we were in the Great Recession. I was reading his stuff every day(not paid by me) and never saw such a bull.

  31. Frwip says:

    Amazing how people always confuse the economy and the markets…

    It explains that from the PM reads :

  32. Francois says:

    Dr. Yardeni expect a recovery when corporations invest only in machinery and software, avoid hiring at all costs, and when they do, make sure workers get the least possible.

    Furthermore, the housing market will be fucked for decades, or until the rule of law reclaim its necessary role (clouded titles, perjurers and thieves in jail etc. As for the financial system, it has been decreed by the powers that be that extraction & crony capitalism, as well as misallocation of capital shall continue until the 99% start to pile up the political victims in historic numbers.

  33. chromex says:

    The problem with all the analysis.including Barry’s that compares this “recovery” ( it is not a recovery for the vast majority of people) to previous ones is that the government and the fed have taken AND CONTINUE TO TAKE extraordinary, unprecedented measures to prop up this recovery, unseen in at least a 60 year span and by any monetary measure, orders of magnitude higher than anything seen previously.Fed and government support that is sustained like this was unheard of when the tech bubble burst We have not seen, in my lifetime ( and I am approaching 60) the sort of sustained low interest rates, bank bailouts, job numbers fudging ( the numbers are laughable because the vast majority of jobs are low wage service jobs as a look at the average wage of the new jobs will tell you) and trillions of dollars poured into propping up the economy .The results, which may support a theoretical “recovery” on paper, have been more than disappointing to the vast majority of folks.
    If you think about it, then, there are underlying causes of this that suggest ( I do not have an agenda I don’t know what these are or how to remedy them) that this is not , in fact, a typical post credit crunch recovery and we may never again see such a thing. Only time will tell. But to analyze things without acknowledging that this “recovery” , meager as it is,would not even be seen 4 years later but for extraordinary monetary intervention that shows no sign of abating – and which may have serious consequences up ahead- is to make an incomplete analysis at best