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August 28, 2009

Is the output gap showing?

In a recent speech, Atlanta Fed President Dennis Lockhart laid out two competing risks to the inflation outlook. On one side, the usual measures of economic slack (output gap measures) suggest that there is so much excess production capacity that prices and wages are under great—and increasing—disinflationary pressure. All this is occurring at a time when inflation measures are trending below the FOMC's longer-term projection.

The other inflation risk is that the public may come to believe that the combined efforts of the monetary and fiscal authorities to prop up a sagging economy will ultimately lead to a familiar place—rising inflation—and if inflation expectations begin to move higher, so too will inflation.

So the risks to the inflation outlook seem to pivot on two, potentially opposing, forces: downward price pressure coming from a weak economy and upward price pressure resulting from a skeptical public.

Lockhart's assessment is that these "inflationary and deflationary risks are roughly balanced." But in the end, the security of such an inflation outlook rests largely with the behavior of the inflation data. So it is important to continue watching carefully for any signs that the balance of these risks is tilting in one direction or the other.

This view brings us to a chart posted in last week's Economic Highlights showing recent trends in core goods and core services prices in the consumer price index (CPI).

082809a

A key observation to take away from this picture isn't the recent acceleration in core goods prices. The highly volatile behavior of goods prices tends to make them an unreliable guide to underlying inflation trends. Rather, it is noteworthy to consider the significant downward trek of core services price growth. Indeed, the 12-month trend in core services prices was a shade under 1.6 percent in July—its lowest reading in the post-WWII era and roughly 1¾ percentage points lower than this time last year.

Some of the downward pressure on core services prices is a direct reflection of the housing crisis; a little more than half the core services price components are computed from housing rents. But that's not the whole story as a rather sharp disinflation was evident in core services excluding rents.

082809b

Likewise, productivity-adjusted labor costs—so-called "unit labor costs"—have also recently turned negative. These aren't record declines, but they are well off their prerecession growth rates.

082809c

Is this a sign that economic slack has begun to show through to the retail price numbers? It could be a bit early to bet the ranch on that one. Nonetheless, the evidence seems to offer a pretty compelling story at this time.

By Mike Bryan, vice president and senior economist, and Laurel Graefe, senior economic research analyst, both of the Atlanta Fed

August 28, 2009 in Data Releases, Inflation, Monetary Policy | Permalink

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It's hard to keep up your pricing power when your competitor down the road is liquidating his inventory. And firing his workers. And the factory in town is closing. And the survivors are up to their necks in debt.

Inflation is a very real danger for any commodities that foreign governments can buy and ship out of the USA quickly (like food, art, gold, fish, etc)? An excessively vivid but perhaps useful analogy : look at the stuff that the Nazis raided out of Eastern Europe. Now imagine that they are using local currency (in this case, USD) instead of attacking with military force. There's the inflationary force.

The aggregate number is a perfect fake-out : citizens will be getting roasted by inflation on essentials while their wages (and the tax base of the government levels) crumble?

It is my opinion that there is a simple solution to all this mess but I am one of the many(?) who feel that current US fiscal and monetary policy is a road to total disaster.

A simple graph of nominal cost of hourly labor vs. nominal cost of food would be the one to watch, IMHO. That is what will shape the inflation expectations of the public?

Posted by: Namke von Federlein | August 28, 2009 at 10:13 PM

Mike - a short and clarifying discussion, thanks. A deeper question might be what engine did, could or might drive inflation. Lockhart and this have a traditional business cycle and domestic economy view it seems to me. I think the world has changed and the emergence of inflation, gradually, in '07 and '08 had more to do with the importation of inflation. To wit as China, et.al. were growing so rapidly the increased demands for oil, commodities and materials exceeded the existing capacity and drove up prices. They also triggered additional speculative premiums. That led to prices starting with PPI osmosing or percolating from the very front of the supply chain to the consumer facing side. We're still in a world of D>>S so the question is how big is the gap ? Which is really what will be growing forward growth rates ? China built an export-driven economy but in a newly frugal world US and other consumers won't be buying as much abroad. And certainly not financing it. So in a world of slow, painful and jobless recovery will we face just S>D or S~D ?
That might be worthwhile to investigate. It certainly changes the policy environment, and if these guess are right, aren't well-reflected in any discussions.

Posted by: dblwyo | August 29, 2009 at 08:00 AM

Interesting post. It's always seemed to me that it was problematic to speak of the inflation rate as single a single number. Right now, wage inflation would be good, commodity inflation bad. The loose money seems to be fueling a speculative rise in commodity prices, as household incomes are flat.

In the latest consumer poll by UMich, inflation expectations fell slightly, even though gasoline prices have been rising this month.

I'm not sure the falling rents should be attributable to the housing crisis and not the preceding bubble. Rental vacancy rates started rising as people left apartments to buy homes, but homebuilding increased faster than even this increase in demand justified and homeowner vacancy rates started jumping in 2005/6 and peaked 2008Q1.

Lower household formation has exacerbated what was already a large inventory overhang.

Posted by: Bob_in_MA | August 29, 2009 at 10:14 AM

How about a chart of "core services" CPI x "healthcare?"

Posted by: JohnnyB | August 31, 2009 at 09:28 PM

The term "output gap" suggests that there is idle productive capital and labor (not a HUGE assumption at this point). However, to jump from price level data to conclusions about the output gap could be hazardous, as both supply of goods/services, as well as demand for goods/services, determine the price level. Demand for goods/services has certainly fallen amidst shocks to household wealth and a general shift toward saving a larger percentage of household income. This demand-side effect might be just as strong an explanation, if not a stronger one, than inventory effects on the supply side.

A germane graph to investigate this query would focus on capital utilization and reliable measures of consumer sentiment

Posted by: fischer | September 02, 2009 at 10:44 PM

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August 19, 2009

How fast can the economy grow?

The recession may be ending (and may, in fact, have ended, according to the majority of economists recently surveyed by the Wall Street Journal) but, as Friday's consumer confidence report suggests, the uncertainty about the course of future growth is far from resolved. The most recent consensus forecast from the panel assembled for the monthly Blue Chip Economic Indicators does suggest a nice bounce back into positive growth territory, bringing to an end a four-quarter run of gross domestic product (GDP) contraction.

081909

What remains interesting, however, is the range of disagreement about just how fast the recovery will be. The upper and lower black lines in the chart above delineate the 10 most optimistic forecasts (the upper lines) and the least optimistic forecasts (the lower lines) among the Blue Chip panel's 51 economists. Most interesting is the fact that some collection of theses economists are, in any given quarter, guessing that growth will not break a 2 percent annual pace before we exit 2010.

That uncertainty is compounded by an even more consequential uncertainty, lucidly emphasized recently by Menzie Chinn (here, here, and here): How fast can we grow before straining the economy's capacity? In other words, is slow growth the best we can expect given the economy's current potential?

The output gap—the difference between the current level of GDP and estimated potential—has long been standard fare in policy analysis. Over at iMFdirect, the International Monetary Fund's blog, Ajai Chopra explains why we care:

"What would be merely a curiosity during better times—after all, potential output is a largely abstract concept measuring the level of output an economy can produce without undue strain on resources—has become a particular worry in the context of the global economic crisis…

"Right now, budget planners across Europe are scrambling to estimate the strength of the blow the crisis has dealt to public finances, and not knowing the growth potential of their economies greatly complicates their task. If they overestimate potential growth, they would underestimate the need for fiscal adjustment once the crisis has dissipated, raising thorny issues of fiscal sustainability in the longer run.

"Central bankers, too, are looking for guidance on the path of potential output. Their decision on when to start winding down current crisis policies depends on the difference between potential and actual output, the so-called output gap. If the output gap is closing faster because of a drop in potential, policymakers might decide to increase interest rates a little earlier and a little higher to prevent  inflation from rising."

Economists also do not lack methods for estimating the output gap and, just in case the field is not crowded enough, Atlanta Fed economist Jim Nason has done some investigating of his own. Jim looked at a variety of statistical estimates of the output gap and arrived at what is now a pretty familiar conclusion. To wit, there is substantial variation in output gap estimates across the different methods, and I do mean substantial: The gap estimates for the second quarter of 2009 range from –0.5 to nearly –11 percent depending on which method is used. In other words, some methods imply the gap is very large, others say the gap is rather small.

I am tempted to invoke the ancient economists' chant, "noh-bah-de-noz," but real-life policymakers don't have that luxury. So we delve in the details and try to sort out what seems like the best approach. (If you have a technical bent, you can do the same with Jim's estimates by following this link.) As we sort it out, though, Ajai Chopra gives some sound advice:

"As for central bankers, they should also act on the information they have, although researchers such as Athanasios Orphanides (now Governor of the Central Bank of Cyprus and member of the ECB's Governing Council) have sensibly suggested that central banks should tread carefully by reducing the importance of the output gap in their decision making.

"More generally, policymakers—be they in the central bank or in the ministry of finance—would do well by communicating their assumptions about potential output growth to the public."

With that in mind, I will leave you with the recent communication on the subject offered by Federal Reserve Bank of Atlanta President Dennis Lockhart:

"Many observers see substantial slack in the economy that could persist for some years. Economists' more formal term for slack is "output gap." We at the Atlanta Fed see a meaningful output gap developing, but in our view it is smaller than would normally be associated with the weak pace of growth we expect over the next couple of years because all the obstacles to the natural pace of growth already mentioned have brought down the economy's potential for the medium term."

So, as President Lockhart indicates, mark us down, for now, on the low end of output gap scale.

Update: The San Francisco Fed's John Fernald and Kyle Matoba offer some related thoughts in the newest edition of the Bank's Economic Letter (hat tip to Econbrowser).

By David Altig, senior vice president and research director at the Federal Reserve Bank of Atlanta

August 19, 2009 in Business Cycles, Economic Growth and Development, Federal Reserve and Monetary Policy | Permalink

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Call me crazy, but I think this thing will turn and do so fast. We'll be busy again soon. But after that initial buzz, I don't know.

Today people are so connected and capital networks and social networks stronger than ever in world history. That is a factor not included, even in 01-02. Let's see if I'm right.

Posted by: FormerSSResident | August 20, 2009 at 07:07 PM

Turn good that is, from above.

Posted by: FormerSSResident | August 20, 2009 at 07:08 PM

Wow, and ouch. What a lot of puts and takes. Forgive me if the old quote about sound and fury signifying little occurs but nice to see all the different approaches. Reading thru them all just now it seems to be that the semi-traditional methods still seem to work and have been more accurate empirically. What Menzie calls a PDF/New Keynsian approach reflects in the CBO, FRB and IMF/WB estimates. Given that Menzie's last post which shows the IMF projections where GDPpot drops to 1% in 2010 and barely climbs back to 2% by 2015, with unemployment not reaching its speed limit until 2016 seems like the defensible position. ???
You might want to look at John Hussman of Hussman Funds take as well:
http://www.hussmanfunds.com/wmc/wmc090817.htm

It also seems to me a brute force approach would look at CalculatedRisk's work on comparing this to prior downturn's employment where this is deep and slow and "flipping" it around in a mirror image (an algebraic rotation)would also suggest "breakeven" in 2016.

Taken all together and reflecting Pres. Lockhart's view it would seem we're in a painfully slow and low recovery for most of the next decade.
Comments, reactions, correction ? Please tell me I'm wrong.

Posted by: dblwyo | August 20, 2009 at 07:13 PM

The economies capacity to supply is not a problem. Productivity growth was remarkable in the second quarter. The amount of unused productive resources is staggering. Capacity utilization is 12.4 points below its 1972-2008 average. Returning to the 64.3% employment/population ratio of 1999-2000 would necessitate an 11+ percent increase in private sector employment in just two years (or a 13% increase in three years).

Getting back to full employment is a challenge, but not impossible. Four times in the last 70 years, private sector employment has grown by more than 11 percent in just 24 months. Three of them were war related: entry into World War 2, demobilization after WW2 and entry into the Korean War. The peace time example was from January 1977 to January 1979 when private employment rose 11.5 percent. This two year period also set a 50 year record for percentage increase in total hours worked in the non-farm economy and for increases in the employment-population ratio.

What caused such remarkable growth in 1977 and 1978? Answer: a generous TEMPORARY Federal tax credit for increases in employment above 102 percent of the firm’s employment.level in the previous year

The Democratic Congress elected in 1976 arrived in Washington at a time of high unemployment, anemic (3.4% during 1976) employment growth and rising inflation due to the quadrupling of world oil prices in 1973-74. It responded with a temporary New Jobs Tax Credit (NJTC) for 1977 and 1978 that lowered the marginal cost of expanding a firm's workforce by roughly 15 percent on average (more for low wage and high turnover firms). Despite foot dragging by the IRS, one third of the nation’s private employers received NJTC credits that lowered their 1978 taxes by $3.1 billion. By the final quarter of 1978, capacity utilization had spiked, real output had increased 15 percent and unemployment had dropped from 7.8 to 5.9 percent.

The expiration of the NJTC at the end of 1978 did not unravel these effects. During the next 12 months, output and employment continued to grow albeit at a slower pace and the employment-population ratio and unemployment rate were stable.

The later 1980 and 1982-83 recessions were caused by the 160% increase in oil prices precipitated by the Iranian revolution & the Iran/Iraq war and the Federal Reserve response to inflationary consequences of the oil shock.
http://digitalcommons.ilr.cornell.edu/articles/242/

Posted by: John Bishop | August 22, 2009 at 06:50 PM

Perhaps this discussion is too macro. A good chunk of our unused capacity is capacity to build more housing--when we already have a substantial excess supply. (Data here: http://www.census.gov/hhes/www/housing/hvs/hvs.html). Getting that unused capacity productive again would not make us a wealthier country, it would only make us a more-over-supplied-in-housing country.

Some of the resources used to create this productive capacity need to be redirected to other sectors, but some of the resources are so specialized (backhoes, nail guns, chop saws) that they may rust away before they are needed again.

This suggests that meaningful capacity is lower than currently measured, our output gap is less, and the room for a rebound is less.

Posted by: Bill Conerly | August 23, 2009 at 01:01 PM

As a business writer, I hope the economy is improving. In the 30-plus years I have been reporting on small business topics, I have never witnessed more devastation in the marketplace. It is a Hurricane Katrina out there. What small business needs is a big infusion of credit to jump start the market. Credit has been cut off to businesses through no fault of their own. To cite just one example, a contractor had a $500,000 line of credit reduced to zero over night. Following that he laid off staff members. This sector of the economy is in desperate need of help. The big banks received help, now it is time to help the little guy.

Ron D

Posted by: Ron Derven | August 25, 2009 at 11:03 PM

the difference between potential and actual output, the so-called output gap...f the output gap is closing faster because of a drop in potential, policymakers might decide to increase interest rates a little earlier and a little higher to prevent inflation from rising...great help..learn a lot..people should know about this..

Posted by: Repair Credit | June 22, 2010 at 07:26 AM

You've said that the recession to the economy may end, but how could you say that when it's not yet that stable?

Posted by: Build Credit Fast | August 02, 2010 at 05:03 AM

how could you say that when it's not yet that stable?

Posted by: Credit Repair Services | August 25, 2010 at 09:13 AM

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August 14, 2009

What's really different about this recession?

The short answer to the question posed in the title of this blog post is, of course, "lots of things." One of those things is featured in the latest edition of Economic Highlights, the Atlanta Fed's weekly digest of newly released economic statistics. Here, specifically, is a chart reflecting the trajectories of individuals working part-time for economic reasons in the current and past recessions.

081409

As the chart clearly shows, the increase in people reporting that they are involuntarily working part-time rather than full-time is considerably higher in this recession than in past recessions. Although the increase in these workers has moderated some since the spring of this year, the number of people in the category of working part-time for economic reasons remains at 8.8 million, well above the level of past contractions in both absolute and relative terms.

This recession has given us many puzzles to mull over. Now we can add the unusual pattern of part-time work to the list.

Side note: We invite you to check out SouthPoint, the Atlanta Fed's new weekly blog on regional economic conditions in the Southeast.

By Menbere Shiferaw, senior economic research analyst at the Atlanta Fed

August 14, 2009 in Business Cycles, Labor Markets | Permalink

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looking at fed data on employment I get the
feeling that the '01 recession never ended.

Posted by: who_saves | August 14, 2009 at 07:43 PM

Can you define "part-time?" There is quite a difference between, say 35 hours a week and 20 hours. Thanks.

Posted by: MiTurn | August 15, 2009 at 01:20 AM

Very interesting;

another gauge is the no. of temporary workers, which is considered a leading indicator.

Posted by: hedonist | August 15, 2009 at 05:17 AM

This is also happening in Australia -
"Since the high of November 1992 the rate generally decreased to the recent low of 10% in May 2008 and has since risen to 13.4% in May 2009." from

http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/6105.0Feature%20Article5Jul%202009?opendocument&tabname=Summary&prodno=6105.0&issue=Jul%202009&num=&view=

Posted by: Moz | August 16, 2009 at 07:39 PM

Yes I agree, all recessions are different, but somehow, I think the US will run out of money long before this mess can be corrected. Hey, why is the overnite funds rate ZERO? Do you want people to save money, and then interest rates on savings are almost nothing, and the banks take turns going out of business every weekend?

You're invited to comment on MY blogsite!

Thanks You, John DeFlumeri Jr.

Posted by: John DeFlumeri Jr | August 18, 2009 at 07:13 PM

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August 06, 2009

Every recovery is the same; each recovery is different

Two weeks ago, macroblog looked at the rather pessimistic expectations for what the economic recovery might look like this time around. Included was part of the narrative noting that structural adjustments are likely to impede a quick snapback in gross domestic product (GDP) over the coming quarters.

Macroblog reader Bryan Lassiter asked, "Do economists typically predict a weaker recovery than history suggests?" Good question. To state the question in a slightly different way, "Has the United States ever been in a situation where it experienced a deep recession and forecasters subsequently predicted a slow recovery that ultimately proved to be incorrectly pessimistic?"

To get at these questions, we can look at real-time real GDP data and the Survey of Professional Forecasters (SPF) available from the Federal Reserve Bank of Philadelphia (while the SPF started in 1968, forecasts of real GDP began in 1981).

080609

The chart plots the depth of the recession on the x axis and strength of recovery on the y axis (updated from the 7/24 post to include last Friday's GDP release). The blue diamonds were constructed using forecasts that were made in the quarter the recession officially ended; the red squares are what actually happened.

To illustrate the exercise, pretend we're back in the fourth quarter of 2001 and the recession is over (although we didn't know it). Given what we thought we knew about the economy at the time, we can look at what forecasters were expecting in terms of GDP and compare it with what was ultimately reported by the U.S. Bureau of Economic Analysis. Looking at the 2001 recession, we can see that the expectations for recovery were not that far off, but the severity of the recession was lessened—partly because of data revisions and partly because of forecast error. The 1990–91 recession showed a similar pattern, but in reverse. That is, the recovery forecasts were close to the actual experience, but the depth of the recession ended up being more severe than initially thought.

What stands out in the chart is the recovery following the 1981–82 recession. In real time, four-quarter GDP growth was expected to be about 3.5 percent but wound up being much stronger at nearly 8 percent. In this instance, the response is yes to the initial question of whether economists typically predict a weaker recovery. With the 1981–82 episode, we saw a recession where economists had forecast a recovery that ultimately turned out to be much stronger than anticipated. However, the 1981–82 blue diamond was still relatively close to the cluster of other recessions on the chart, meaning the recovery forecast was not exceptionally weak. Thus, the current recession still seems to be an outlier. Given the almost 4 percent decline experienced in GDP, the hope would be to see something stronger than the 2.5 percent growth expected over the next year.

Whatever the impediments to a sharp recovery, forecasts are certainly telling us that economists are treating this recession as being different from previous ones.

To help track the economy going forward, check out our weekly Economic Highlights and Financial Highlights.

By Mike Hammill, economic policy analyst at the Atlanta Fed

August 6, 2009 in Business Cycles, Economic Growth and Development, Forecasts | Permalink

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Interesting.

But if I understand the graph correctly, I think there's a bit of sample selection bias. You are only considering data points where we know ex post that the recession ended and recovery started on that date. The forecasters didn't know that.

Take a simple example: suppose GDP follows a random walk, with a 50% chance of an increase and a 50% chance of a decrease. The rational forecast will always be for no change. But if we only look at data points where recession ended, we will always see positive growth. So forecasters will always appear to have underestimated the speed of a recovery.

We are comparing: the unconditional forecast of the speed of recovery; with the actual speed of recovery, conditional on recovery happening.

Posted by: Nick Rowe | August 07, 2009 at 08:19 AM

If the forecasts were always the correct direction but only 50% of the right size, you'd conclude that the forecasters were simply too timid, and just double the published forecast.

Alas, recoveries are called too early, leading to the magnitude of a recovery being larger than forecast, but the growth from the point of forecast until the recovery mark being more accurate, even though the short-term forecast was probably the wrong direction.

It seems this counting method is almost designed to give too few data points to analysis. Why not look at the typical 1-year-ahead forecasts, and see how much of all the turns -- both positive and negative -- are captured? With more observations, and fewer issues about selectivity, one could better see that predicting the future much different than the trend is furiously difficult and fraught with error.

And we're not even into the potential biases from the usage of these forecasts. We might debate whether it's more of a problem for society -- for investors, policy-makers, businesspeople -- to have a too-optistic or too-pessimistic outlook. Since part of forecasts for a long time has been cheerleading, and consumer confidence is endogenous here, we can expect lots of well-intentioned happy talk, just like we heard going into the recession.

Posted by: Walt French | August 07, 2009 at 06:58 PM

Nick - I kind of think that’s the whole point of looking at “real time”. To see forecasters’ behavior at the end of a recession with the information they had available to them. They might have had a hunch it was over, but were uncertain about it (sound familiar?). GDP doesn’t follow a random walk with a 50-50 chance of going up or down. It tends to go up more than down - remember productivity, labor & capital? I agree that GDP goes up after a recession ends - the question is by how much and how fast. And, if the economists are way off this time around.

Posted by: jb | August 10, 2009 at 09:31 AM

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August 04, 2009

GDP benchmark revisions: Count me very surprised

Last Friday morning, the Bureau of Economic Analysis released its advanced estimate for second quarter gross domestic product (GDP) as well as its benchmark data revisions. These revised data tell us a slightly different story with a rather negative twist in looking at the last two recessions. The new GDP numbers show that the 2001 recession was not as severe as originally thought while the 2007 recession is worse than first reported. Below are the comparisons of the pre- and post-2005 benchmark data:

080409a

080409b

As a follow up to David Altig’s blog posting, "Unemployment Rate: Count Me Surprised," I took the graphs he used measuring cumulative percentage change loss for GDP against the peak unemployment rate during the recession. The GDP numbers below are updated with the new benchmark revision data:

080409c

Note: Macroeconomic Advisors data were used in the original post from July 23. However, since Macroeconomic Advisors has not yet updated their forecasts, I am assuming for the purposes of this blog post that the recession ended with the second quarter of 2009.

After these revisions it’s clear to see that the current recession is even more of a dramatic Okun’s Law outlier than was originally thought when observing the pre-revised data. As background, Brad DeLong described Okun’s Law thus in a recent blog post:

"If GDP (production and incomes, that is) rises or falls two percent due to the business cycle, the unemployment rate will rise or fall by one percent. The magnitude of swings in unemployment will always be half or nearly half the magnitude of swings in GDP."

Although the revised GDP data show more negative growth rates for the current recession, which should make the current recession less of an outlier using Okun’s Law, GDP growth during the 2001 recession was higher than the first observations, which changed the trend line and outweighed the effects of the revision to the data of the current recession.

By Courtney Nosal, economic research analyst at the Atlanta Fed

August 4, 2009 in Business Cycles, Data Releases, Labor Markets | Permalink

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From Wikipedia, "The name refers economist Arthur Okun who proposed the relationship in 1962 "

This is a 1950's and 60's relationship; it's hardly surprising that it doesn't hold in the post-OPEC, globalized, just-in-time, contingent labor world. And that's *before* throwing in the fact that this recession is a financial-panic recession, not a 'take away the punchbowl' recession.

Posted by: Barry | August 05, 2009 at 09:48 AM

So what are the chances that in this case (because of massive amount of gov't intervention) unemployment is now leading GDP and is a harbinger of larger GDP declines in the future?

Posted by: cubguy99 | August 05, 2009 at 12:02 PM

Tim Duy's latest (at http://tinyurl.com/lh9d5c):
"I have argued that most if not all of the jobs in the manufacturing sector simply are not coming back. My suspicion is that firms will use the recession to expand overseas supply chains wherever possible. "

Global labor arbitrage, the endless squeeze. Thanks Greenspan and all your neo-lib enablers, like Rubin, Summers, and the like. Thanks economics profession, for feeding the 'job destruction machine' with your ideologies and your denial.

Posted by: lark | August 05, 2009 at 12:13 PM

Well, it's also possible this is an allocation issue. Meaning where labor was once productive is now much more so somewhere else. I hope that's the case anyway.

The trick is as a worker, how do you know where that somewhere else is? You don't and that sucks.

If econ folks were suddenly all sent to China, what would we do with all those educated and well trained people?

Certainly whats happening now is they would go down the food chain. But in 10 years who knows...

Posted by: FormerSSResident | August 06, 2009 at 03:46 PM

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