Michael Boskin writes that double dip downturns are more the rule than the exception.
I find this to be a very misleading article. What he is writing about is what happens in an actual recession when sometimes real GDP does bounce up for one quarter before resuming its fall.
But that is not the impression the article actually presents. Most readers will think he is talking about a recovery — when the economy experiences several quarters of sequential growth and surpasses the prior peak before quickly falling into a second recession.
As he correctly points out this happened once, after the 1980 recession when the economy rebounded strongly and surpassed the prior peak two quarters after the bottom.
But it is the only example of a double dip recession in the post WW II US history –as this table demonstrates. It is a table of real GDP in recoveries with real GDP at the economic trough set equal to 100. the quarters where real GDP is less than the prior quarter are in red. The red quarters in the 1980 column are the 1981-82 recession.
As the table shows the only double dip is the 1980-81 recovery that was only four quarters long before the 1981-82 recession started. Also note that before 1982, when the great moderation emerged, the norm was for a four year business cycle of three years of recovery and one year of recession. The Fed tightened sharply during the 1980-81 recovery because they thought the 1980 recession was too mild and did not generate sufficient economic slack to sharply dampen inflation. This deliberately aborted recovery — when real GDP surpassed the prior peak — is the only example of what I would call a double dip recession. The Feds tightening also generated recessions in other OECD countries that Boskin cited to demonstrate that double dip recessions are more the norm than the exceptions.
I’m still trying to make up my mind if this article was; one, just a rapidly written article that is accidentally misleading; or two, an article designed to justify the NBER recession committee not having ruled that the 2009 recession is over; or three, something else.
If second quarter real GDP comes in as expected it will be about the same as the prior peak so the US economy should surpass the prior peak this year. In my book that qualifies this past year as a recovery and the NBER should declare the 2009 recession to be officially over.
Wow! Thanks Spencer. i was unaware that the NBER had still not declared an end to the recession. Granted they are conservative, but I thought it was understood the recession had ended. Guess not as of yet, officially.
BTW, kinda makes talk re: double dip a little premature.
The rally is fake based on a jobless economy.
Why this rally is fake.
After tomorrow’s release of Q2 GDP growth (expected to be 2.5-3.0%), it’s going to be hard for NBER to keep putting off the call. That will mark 4 consecutive quarters of GDP growth. Even though NBER doesn’t look exclusively at GDP, and instead looks at “economic activity spread across the economy … real GDP, real income, employment, industrial production, and wholesale-retail sales”, broadly the economy has been expanding, albeit weakly and unevenly, for over a year now. They need to call the recession as having ended in June or July 2009, and if the economy goes south in Q4 or Q1 ’11, then label it a new recession. They can’t hold off on making a call until next year or they become irrelevant.
RichS said: “They can’t hold off on making a call until next year or they become irrelevant.” Sure they can, and it won’t impact upon their relevancy at all.
“Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.”
— JM Keynes
RichS, I don’t disagree!
There are some examples of periods where there was close to a double dip. Below are some examples. There is the year, the quarter, and the GDP growth rate.