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The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.

Authors for macroblog are Dave Altig, John Robertson, and other Atlanta Fed economists and researchers.


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January 22, 2009


A look back at the economy, in presidential terms

In his inauguration speech on Tuesday, President Barack Obama said, "That we are in the midst of crisis is now well understood… Our economy is badly weakened…. Homes have been lost, jobs shed, businesses shuttered…These are the indicators of crisis, subject to data and statistics."

Tuesday, Jan. 20, 2009, was a day filled with excitement and hope but also with uncertainty for the outlook of the American economy. Few doubt that our new president has a daunting task at hand. In fact, there are only two other U.S. presidents (Kennedy and Ford) in the post–World War II period who have entered office while the economy was in the midst of a recession.

Today's economy and its circumstances are constantly changing, and today's situation is quite different from previous experiences. With that in mind, we thought it would be interesting to look back at economic conditions when past presidents have entered office. Below are a few charts and facts describing the current state of the economy alongside historical conditions other post–World War II presidents had to deal with when entering office.

After contracting 0.5 percent in Q4 2008, economic growth for the first quarter of 2009 is expected to come in around –5 percent, according to the Bloomberg consensus forecast. This would mark the largest quarter-over-quarter contraction since the recessions in the early 1980s.

012109a

The employment picture also is grim, with December payrolls showing the largest year-over-year decline since December 1982 and unemployment in a significant upswing.

012109b

Headline CPI contracted 0.1 percent in December from the previous year (seasonally adjusted), marking the first time the monthly indicator was negative on a year-over-year basis since 1950.

012109c

Industrial production continued to dip in December with the worst showing since the 1975 recession.

012109d

So there you have it—a look at the economic picture in historical context as President Obama begins his journey as America's forty-fourth president.

By Courtney Nosal and Laurel Graefe, economic research analysts at the Atlanta Fed

January 22, 2009 in Business Cycles | Permalink

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Comments

I posted a graph yesterday at Econosseur.com, similar to those you have posted here, that charts the annual U.S. deficit as a percent of GDP over time with the NBER recessions and presidential inaugurations. The story that I take away from this analysis is that all presidents who enter office in a recession run up the deficit. We don't have any data as to what would happen if the government didn't respond to an economic crisis with fiscal stimulus.

Posted by: Rick | January 22, 2009 at 04:15 PM

In terms of managing liquidity, consumers can view debt and savings as interchangeable. Therefore as debt becomes more available and cheaper; consumers will reduce their savings. During the rise in home prices, debt was mis-priced (in part because measures of inflation did not account for asset price inflation) so consumer gladly substituted debt for savings.

This is good news because it allows (forces) the government to run a larger deficit every savers need a borrower and right now only the government has the borrowing power left to satisfy the savings desire of consumers.
Now that the credit crisis has made debt more expensive and reduced its availability, consumers seek to rebuild their savings to maintain a desired liquidity cushion.

Posted by: Rajesh Raut | January 27, 2009 at 10:21 PM

I posted a graph yesterday at Econosseur.com, similar to those you have posted here, that charts the annual U.S. deficit as a percent of GDP over time with the NBER recessions and presidential inaugurations. The story that I take away from this analysis is that all presidents who enter office in a recession run up the deficit. We don't have any data as to what would happen if the government didn't respond to an economic crisis with fiscal stimulu

Posted by: Nokia | March 03, 2009 at 09:36 AM

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