I suddenly remembered Noah writing this:
The recessions of the early 1980s were very short and "V-shaped," despite the extremely low rate of TFP growth at the time... By contrast, the early-2000s recession, though shallow, was much longer and "U-shaped", despite the recovery in TFP growth.
"TFP" being "Total Factor Productivity" which doesn't matter at the moment.
Noah's evidence was this graph:
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| Graph #1 |
Apparently, we can be quite literal here and look at the white space under the blue data line at the peaks. The tallest spike on the graph comes at the 1982 recession and that spike is very narrow indeed, compared to the two lesser spikes that follow it. Those lesser spikes occur at the 1990 recession and the 2001 recession.
Thus, not only "the early-2000s recession" but recessions since 1990 have been much longer, and U-shaped: 1990, and 2001, and 2008. Dunno where I read that; Krugman or somebody pointed it out before. However...
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| Graph #2 |
...by the time the Civilian Unemployment Rate gets back down to the "natural" rate of unemployment, all the recessions since 1974 have spikes that widen out quite a bit. But let's set this objection aside for now.
Let's assume the Noah/Krugman/Arts-bad-memory analysis is correct. Let's assume it's true that recessions since 1990 have been longer and U-shaped and different than recessions before 1990.
I suddenly remembered Noah writing that, because I saw this:
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| Graph #3: Corporate Debt 1949-2011 |
Flat spots in business debt following the 1990 recession, the 2001 recession, and the 2008 recession. Flat spots like that don't show up after earlier recessions, even in close-up:
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| Graph #4: Corporate Debt 1949-1993 |
Several thoughts, in no particular order.
ReplyDeleteI'm pretty sure it was Krugman.
I think a high R sq number on a quasi-exponential plot is false validation. I'm going to guess that since the range of numbers is so great - in this case something quite small early on to 7 trillion more recently - that sizable deviations from the idealized curve - as your charts so aptly demonstrate - simply don't register. I suspect R sq is intended for linear plots.
Re graph 2, the part of the curve above NROU shows dramatically how phony the prosperity of the 80's really was. Especially considering that NROU bumped up then.
I'm quite convinced now that the right way to look at a quasi-exponential time series is YoY % change. This normalizes everything.
Consider this. Generally higher highs and higher lows through about 1982. Since - much longer periods and broad, deep troughs. Peaks might be on the decline as well, but with only two to go on, it's hard to tell.
What is unmistakable is that growth has slowed dramatically since the 1982-ish peak. This is the inevitable failure of exponential growth.
Cheers!
JzB
Jazz, yes, broad deep troughs after '82 on your FRED graph. And they line up perfectly with the three flat spots on my Graph #3. And with Noah & Krugman's slow recoveries.
ReplyDeleteSome of that pre-1982 growth on your graph would have been inflation, I'm thinking. So now, the mind turns to making an inflation-adjustment to the debt numbers. Again.
But it's too late in the day to think about it now.