WTF? Huff Po: Canadian television viewers looking for the most thorough and in-depth coverage of the uprising in Egypt have the option of tuning into Al Jazeera English, whose on-the-ground coverage of the turmoil is unmatched by any other outlet. American viewers, meanwhile, have little choice but to wait until one of the U.S. cable-company-approved…Read More
Category: Financial Press
FYI, and a key thing to watch now of course, the Egypt etf has reopened, EGPT, and is up almost 5% after last week’s 13.7% drop and 7.9% in the week prior. http://blogs.wsj.com/drivers-seat/2011/01/23/do-four-seat-sports-cars-ever-look-good-slideshow/
Murat Tasci is a research economist in the Research Department of the Federal Reserve Bank of Cleveland. He is primarily interested in macroeconomics and labor economics. His current work focuses on business cycles and labor markets, labor market policies and search frictions. He has a Ph.D. and an M.S. in economics from the University of Texas at Austin. He earned his B.A. in economics at Koc University in Istanbul, Turkey.
Unemployment has remained very high since the end of last recession, leading some economists to suggest that the underlying trend of the unemployment rate must have risen, driving unemployment permanently higher. Using a more accurate method of calculating the underlying trend, I find that the long-term rate has not risen and that most of the recent increase in the unemployment rate can be attributed to cyclical causes. But the weak nature of the recovery in real output and the slow rate of worker reallocation are likely to keep unemployment at relatively high levels for the near term.
The unemployment rate rose above 9 percent during the recession and it has stayed there for the past 20 months—an unprecedented combination. The only time since the Great Depression that unemployment was higher was after the 1982 recession, but that elevated level didn’t last quite as long—only 19 months. While there is nothing surprising about a high unemployment rate in the midst of a recession, this time around has been unusual on two counts. First, the margin by which unemployment increased was substantially greater than in other recessions, and second, 20 months is an exceptionally long time for the unemployment rate to remain so elevated. Historically, unemployment has always increased whenever the aggregate economy experienced a recession. But the rate typically peaks about 15 months after the beginning of the recession, or 4 months after the end of the recession, and then starts to drop gradually over time as the economy recovers (see figure 1).
Figure 1. Cumulative Increase in the Unemployment Rate
Note: The recession average is the average unemployment rate progression for postwar recessions, and the range is plus or minus one standard deviation.
Source: Bureau of Labor Statistics.
Many economists, policymakers, and forecasters anticipate that the unemployment rate will stay above 9 percent over the near term. Their forecasts typically assume that the underlying trend of the unemployment rate, sometimes dubbed the “natural rate of unemployment,” must have risen over the course of the last recession. But it is more likely, given the size of the drop in aggregate economic activity during the recession (4.15 percent, the largest in postwar U.S. history), that the unemployment rate’s rise is due mostly to cyclical factors. I argue that even if the unemployment-rate trend has not increased, the unemployment rate could still stay high for some time. Moreover, the weakness of the recovery in real output and the slow rate of worker reallocation are likely to keep unemployment from declining to pre-recession levels any time soon.
Discuss. UPDATING: In the deep, dark recesses of my mind, I knew this chart was the result of accounting changes. But I more or less spaced when I was going through charts at FRED and decided this was discussion-worthy even though I really did know better. I apologize to all for the brain fart; I’ll…Read More
The Jan Chicago PMI was a solid 68.8 vs expectations of 64.5 and up from 66.8 in Dec. It’s the highest since 1988 but measures the direction of improvement, not the degree but an impressive figure nonetheless. New Orders rose another 4.4 pts to 75.7, the highest since 1983. Backlogs rose a touch. Importantly, the…Read More
As if there wasn’t enough global government event risk that world markets have to focus on, whether Chinese and other Asian central bank rate hikes, also in Latin America, European sovereign debt and solvency issues, and US Fed policy, Egypt and its potential ripple effect consequences throws us another wrench. Without getting into the geopolitical…Read More
Be sure to read the 39 recommendations from the UK: The Future of Banking Commission in their attached report. The Brits took a very different approach than the Americans did, and the report stands in stark contrast to the FCIC in its approach. You can read it in its entirety here.