The average duration of the US economic recessions since 1900 was 14.4 months. Given the recent string of weak economic reports and the freeze up in the credit markets, the question regarding the current period is no longer if we are in a recession, but when did it start. Using the assumption that the recession began at the start of 2008 (using Industrial Production and Employment statistics), if the current period ends up as just an average contraction, then we could expect the economy to bottom some time in the spring of 2009.
As shown in the chart, there is a clear dichotomy in recessions prior to WWII (red) and recessions after WWII (blue). Pre WWII, the average recession lasted 19.1 months. Since then, though, the average duration has been nearly cut in half to 10.2 months. While the reason for the shorter duration is up for debate, the faster information flow has certainly allowed companies to quickly adjust activity in order to compensate for shocks to the upside or the downside. By the post-WWII standard, the current recession should have ended in November, 2008. Therefore, the Obama turnaround is already several months overdue. Nothing to crow about there!
No comments:
Post a Comment