Even with the rebound in second quarter growth, first half growth was still under 2%. Moreover, newly revised real GDP data reports even slower growth over the past few years. For some five years the consensus has forecast stronger growth right around the corner, despite the fact that it has consistently been too optimistic. This has clearly been the weakest economic expansion on record. On the other hand, the expansion is now 73 months old, which ties it with the early 2000s expansion as the fourth longest on record. The longer ones were the 1960s expansion of 106 months; the 1980s one of 92 months and the 1990s one of 119 months.
Although I was an adult during the 1990 recession, I was not yet paying much attention to the economy. It was much less clear to me why we had a slow recovery then than it has been to me for the 2000 and 2007 recessions. I found this paper very enlightening:
It basically says things were different then because the Fed did not have credibility in its willingness to restrain inflation. It could not control the inflation scare that occurred in 1987 and be flexible with respect to the stock market crash that occurred the same year.
Per the paper (in my reading), the Fed also uses an output gap as a tool to allow it flexibility. I suggest it has underestimated other changes since 1987. Inflation keeps not taking hold because we are unable to demand wage increases. The two recession that have occurred since the FED gained its inflation fighting credibility have occurred because speculation led to unsustainable booms which eliminated the output gap, but the loss of worker power means they need very little gap.
If the Fed can find a tool for bubble detection, the current expansion could easily end up being the longest.
Dean Baker’s analysis of rents and vacancy rents should have been enough for people to recognize there was a housing bubble.
Greenspan himself said irrational exuberance. I look back a employment to population ratios as a sign in 1997 or 1998.
Clearly it is hard not to allow (and even praise growth), so I can see why the Fed persists in its desire to “normalize”, but again employment to population ratio and lack of wage growth both say no bubble .
The “weakest” expansion on record is a bit of a myth. GDP is not a factory.
Arnie, employment to population was very demographically driven index. Most of the rise came in the late 70’s to late 80’s. Don’t forget that.
You can see the head and shoulders pattern of it. I don’t know why people consistently drivel over it. They simply don’t understand how it is calculated and its general patterns since 1948.
If you mean by gender, I would agree. The rise of one as opposed to the decrease of another is apparent. There are other factors also.
“….This has clearly been the weakest economic expansion on record. On the other hand, the expansion is now 73 months old, ….”
It’s the Lesser Great Moderation.
Not bad , really , if you happen to be rich. That’s my guess , anyway.
Too often, in fact without exception, “expansion of an economy is described as a monolithic phenomenon within what ever geographical boundaries that are the focus of the discussion. As in “expansion of the U.S. economy”. The data that are used to describe or make conclusions of the economy is presented as some average, some measure of central tendency. Isn’t that a significant distortion of what may be going on within any such economy. On a national scale isn’t that data subject toa large measure of error. Aren’t the factors that impinge on an economic system so complex as to virtually defy such measurement, and its description through measures of central tendency. That’s like measuring the incomes of Buffet, Gates and Trump and averaging thosewith the rest of the working population. No matter what averageg is used it is going to be distorted.
There is not just one economy to be measured in any national political system. Over the past ten years the working class of most countries have suffered significant economic set backs. Have the wealthiest citizens of those countries suffered the same loss of either income or wealth. It is difficult to imagine that Jamie Dimon and his ilk are concerned about their economic status. Economies are not monolithic. Economies, even within national borders, are multidimensional.
They should be measured and described as such. The use of measures of central tendency to described multidimensional concepts is misleading and hides the truth about the systems being measured and described.
Here is a good example of what I describe, above. From today’s NY Times we get this story regarding the magic of austerity in regards to the economy of Spain. “Spain, heralded by many as a success story for austerity policies, is on track for more than 3 percent growth this year and has created more than one million jobs since the beginning of 2014.
But for many Spaniards, like Mr. Puyalón, the statistics are meaningless — even suspect.”
And China devalues the yuan. Kind of the opposite is it not of what supposedly the world needs from China to create a more “balanced” import/export situation?
Obviously China is trying to hang on to their outrageous growth that was the results of western economies dumping their labor force for making money from money.
Who really thought you could reduce labor in a developed country and somehow the people would keep on buying such that developing “markets” could keep on selling? Who thought China could keep on growing without allowing their citizens to have more freedom of thought (that is the breaking of the one part rule)?
Did our trade deficient just get worse with China’s move? I think yes. This is a terrible catch 22 we have let our economic thinkers get us into and I don’t think they see that it is such.
rage, you can pick data sets to limit the impact of demographics. You are right not to use it in isolation, but it confirms the dot-com bubble and the current output gap.
I mostly agree with Dan Becker’s view and if you need more evidence please go see today’s Wallstreetonparade.com. They always tell it like it really is. For the real strong at heart that can think outside the politically correct box go see Paulcraigeroberts.com. He is also not afraid to speak the truth about what is really happening in America. P. Krugman says that part of the problem is that too much wealth inequality comes from wall streets institutionalized wealth transfer system where wages did not rise proportional to the rise in capital earnings. Now China has started the race to the bottom with the 1.9% devaluation. Perhaps we will be calling this the Wal-Mart bubble soon? What is necessary to change a person’s thinking is to be able to change his self awareness. Maslow.
From the link Jack posted: Experts say that is not surprising because the vast majority of the new jobs are part-time — some lasting only a few days — and they pay poorly, doing little to improve the lives of the millions of Spaniards who lost their jobs during the global economic crisis.
I have been wondering about the 2 economy and how we are documenting both resulting in a false understanding leading to frankly stupid policy.
Daniel Becker Wrote: “I have been wondering about the 2 economy and how we are documenting both resulting in a false understanding leading to frankly stupid policy.”
I have also wondered about all the aggregated data that we use. But what other choice do we have. And it is aggregated quarter after quarter, year after year. Probably the best we can do is cite the data with a warning about the potential disparities between income levels.
I often cite the Household Debt and Credit from the New York. I appears to me that the much smaller movements in the total household debt indicates that households are about maxed out on debt. (The stagnant wages are still a problem.) BUT, that is very unlikely for those making higher incomes and the counterpoint is they probably wouldn’t borrow more anyway. Probably a wash.
JimH, Better data is not the problem. Better data presentation is how one allows the reader to understand the truer nature of the phenomenon being measured and summarized. If you cite the mean, is the standard deviation ever disclosed? If the mode is being used, is the spread of scores being described in detail? Economic data as we have it to read is more likely than not seriously skewed, especially in regards to income. Is there a graphic presentation to exhibit that long tail? Better yet, break the income data into population intervals and present the summarized data from that perspective.
You won’t see any of that because the purpose of too little descriptive data summation is to obscure the true character of the phenomenon being described. I too recommend Paul Roberts as someone who makes an effort to uncover the real nature of our economic problems. Tey this report from CounterPunch: http://www.counterpunch.org/2015/08/11/the-collapsing-us-economy/
Jack wrote: “Tey this report from CounterPunch: http://www.counterpunch.org/2015/08/11/the-collapsing-us-economy/
Interesting. I read it here earlier today:
But there he cites shadowstats.com statistics instead of U6. I have read some of those but I would rather use US government stats and include the warnings. Otherwise you are stuck defending his differences with the US official stats and I am not up to that.
It has occurred to me that we would be better off with stats regularly published for each quintile. But that is not going to happen.
I can not find a reason to disagree with his conclusion “Clearly, this is not an economy that has a future.” In fact the other data that I check just confirms it.
JimH: “It has occurred to me that we would be better off with stats regularly published for each quintile.”
What sort of stats would you want published?
I’d prefer data presentations that did not use descriptive statistics to hide the true character of the data behind a wall of “averages” without a description of the spread of the scores or the shape of the distribution skew.
Surprisingly bad results in the Atlanta Nowcast of 3rdQ GDP. 0.7% is the current read on growth for July-September. This is about 1/4 of what the expectations have been. If these numbers hold up the YoY GDP will be closer to 2% than the 3.3% that Social Security is banking on.
From the Fed report:
Latest forecast — August 13, 2015
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2015 was 0.7 percent on August 13, down from 0.9 percent on August 6.
The Nowcast link:
BKrasting wrote: “Surprisingly bad results in the Atlanta Nowcast of 3rdQ GDP. 0.7% is the current read on growth for July-September. This is about 1/4 of what the expectations have been.”
I am curious. Do you believe that the Atlanta Nowcast is a reliable and meaningful indicator?
I am undecided. Help me out here. (Smiling here)
JimH – Obviously you are not familiar with the Fed’s Nowcast. If you were, you would know that it has been incredibly accurate.
Consider the source – It’s the FED. Hard to get a better data provider.
Consider the Data. These are hard numbers. This is the data that makes up the GDP calculation. By the end of the quarter the Nowcast will ALWAYS equal the actual announced result of quarterly GDP.
Consider the following article from Forbes. They describe the Nowcast and its “Spot-on” accuracy.
“the YoY GDP will be closer to 2% than the 3.3% that Social Security is banking on.”
Banking is a poor word choice. It sucks that wages stink, but Labor Force is 0.7% compared to 0.6% and Employment is 2.2% compared to 1.3%, so you are concerned about a measure with second order effects when the measures with higher order effects are doing well.
Arne – Why is ‘banking’ a poor choice? SSA has based its “hopes” and “confidence” on a forecast made 7 months into the calendar year.
phrasal verb of bank
base one’s hopes or confidence on.
A little help please? I did not understand all of your response. Can you explain this a bit more? Tks.
Labor Force is 0.7% compared to 0.6%
and Employment is 2.2% compared to 1.3%
Krasting the Atlanta Fed is not “the FED”.
“Consider the source – It’s the FED. Hard to get a better data provider.”
And it is not clear that the staff of all of the Regional Fed’s are of the same quality or that their work product is either.
It may be that his particular metric by this particular Fed Bank does in fact have a great track record but it will take more than a CAPS LOCK key and a “the Fed is the dreamiest!” to be convincing here.
Plus it would be a lot more convincing still if you actually linked through to the original data sourcePlus I am not sure that I am going to take the opinion of the secondary sources you often do and cite Business Magazines/Blogs like Forbes or IBJ. Because their reporting all too often slides over into editorial. Now that I see that your original comment did cite the Atlanta Fed let me check it out directly. Because even if Forbes had an accurate assessment of its performance in Q1 that article is from almost 4 months ago.
“Is GDPNow an official forecast of the Atlanta Fed or the Bank’s president?
No, it is not an official forecast of the Atlanta Fed, its president, the Federal Reserve System, or the FOMC.”
From the FAQ.
Webb – At 2:10 I provided the link to the Atlanta Fed’s Nowcast. Your comment that I did not provide the proper link is baseless.
It’s fine with me if you want to ignore a reliable data source. I do find it odd that you would dismiss the Fed. Who would you rather get info from? Merrill Lynch?
Where do you get info from that is a good alternative to the Fed? Or do you just not care about these things?
The SS Annual Report is not an expression of “hopes”. It contains an analysis of uncertainty, but where “confidence” can be a synonym for uncertainty in some settings, it is not where the phrase “banks on” is used. IMNSHO.
Table V.B2.- Additional Economic Factors
Note also that Table V.B1.- Principal Economic Assumptions has CPI forecast at 0.2 and it looks to be coming in at 0.
I don’t claim that the outlook is rosy because these few parameters are coming better than forecast. I claim you should not diss the outlook because one parameter is coming in worse.
While I am posting, I would note that I suspect their GDP numbers are high, but I also suspect their CPI numbers are high because I think the Fed will continue to maintain its credibility on interest by continuing to allow an output gap. If I am wrong, both number will go up with little net impact on SS solvency.
Krasting are you actually that unaware of the conventions of internet blogging?
When you see strikeouts it is an admission by the poster that the original claim was in fact wrong without simply amending it away. It is thus my EXPLICIT acknowledgment that my ORIGINAL comment was faulty. And this even though the original was up for so short a time that probably no one could have seen it.
Meaning you are asking me to apologize for my apology.
And to repeat, this metric/publication from the “FED” is not from the Fed but instead some sort of work project by economists at the ATLANTA Fed (which is not THE FED) and if you link through has the disclaimer given in its OWN FAQ:
“No, it is not an official forecast of the Atlanta Fed, its president, the Federal Reserve System, or the FOMC.”
You didn’t get this from the Fed. Or the FED. Which either you knew or which demonstrates that you are a sloppy blogger. Something equally proved by the fact that you fired off here without paying sufficient attention to the details of my comments with, without, before and after corrections.
Finally you didn’t show that it was a “reliable data source”. Instead you very lazily quoted from a months old article indicating that FORBES saw it as a reliable data source.
Plus, plus, finally plus you don’t show any actually sourcing for how the number projected by the Atlanta metric, which includes data not actually in (because ‘July to September’) actually translates to the GDP number you cite in opposition to that of SSA.
Lazy, lazy and sloppy.
Webb – So you don’t understand the Nowcast either. It is not a FOREcast at all. It is a NOWcast. It does not tell you what the GDP will be in any quarter, it tells you what the data that has been released is indicating what the quarter will be. The Nowcast estimate varies during the quarter, but it is always very close to what the BEA says for the flash GDP report by the end of the quarter. That has to be the case as the Nowcast uses the exact same data as BEA. Nowcast does it in real time while BEA waits until all the #s are in.
I provided a link from a reliable source as to the accuracy of the Nowcast and you say I’m being lazy for not providing you more links. I think you are being lazy – search for “Nowcast accuracy” and you will see hundreds of articles. You want to punch holes in this – you do the research.
The fact is that the Nowcast has been very accurate. It is a tool used by many who follow economic performance. Those that have followed it on a regular basis the past few years all recognize it as a an important new tool to understand how the economy is performing in real time. Clearly you have not been following the Nowcast, if you had been you would know that the information has been remarkably accurate.
BEA has 1st Q at 0.6% and 2nd Q at 2.3%. The Nowcast for the 3Q is currently indicating at 0.7% for the 3rd Q based on the actual numbers that have come out so far in Q3. The Nowcast will be revised a few more times as more numbers come in, but it will be hard to get to 3% for the Q based on the numbers that have come out so far.
If you look to my original comment above you will see that I said I was “surprised” by the Nowcast of 0.7. I was looking for a much higher number, but the actual number can only be looked at as ‘disappointing’ so far.
Real reported GDP is up 1.5% in the 1st half of the year. What growth rate is necessary in q3 and q4 to get to SSAs 3.3%? About 5% – that ain’t gonna happen. However, if you still believe in the 3.3% number then I would propose an over/under wager.
You say I’m lazy and sloppy. I think you’re just uninformed.
I have a better understanding now. Thanks.
I guess my take is, that we will have to see the final GDP number for 2015 before we judge Social Security numbers.
The only important issue in regards to the relationship between Social Security and GDP is whether the measure of GDP reflects the earnings of the majority of workers. If you can only discuss one gross measure of economic activity, GDP, ten you know almost nothing about the status of workers’ income and, therefore, you know almost nothing about the condition of Social Security. And this applies to the present as well as the future. If the distribution of income and wealth is not taken into account in the measurement of economic activity and growth then who gives a shit about that measure. Except for the obfuscators, that is.