Tuesday, July 21, 2009
On the recovery:
- Roubini on CNBC (with video, found on Calculated Risk):"The recovery is going to be subpar," Roubini said. "I see a one percent growth in the economy in the next few years. There will also be 11 percent unemployment next year and the recovery is going to be slow. It's going to feel like a recession even when it ends."
- Dennis Lockhart (from Bloomberg): “The economy is stabilizing and recovery will begin in the second half,” Lockhart said in the text of remarks in Nashville, Tennessee. “The recovery will be weak compared with historic recoveries from recession. The recovery will be weak because the economy must make structural adjustments before the healthiest possible rate of growth can be achieved."
- From the Federal Reserve Bank of San Francisco (via Economist's View): "In our view, the recovery will be painfully gradual, with the economy expanding below potential for several quarters."
By the way, I am also looking for statements by economists that are calling for a V-shaped recovery - please pass along links to those articles.
The chart illustrates GDP in levels (indexed to the end of the recession at 100) during the recession and recovery (the 2 years following the recession, except for 1980, which is 1.5) for all post-war recession that dropped GDP 2% or more, the Biggies. Note: the recession dates are set by the NBER.
- The '73-'75 recovery is often classified as U-shaped.
- The '81-'82 recovery is the typical V-shaped.
- 1980 was headed toward the V, but then the economy "dipped" back into recession - the so-called W-shaped.
- Notice that the recovery for 07-09 (provided the recession ends in Q2 09) is nothing short of pathetic. The 07-09 A recovery uses Wells Fargo's publicly posted forecast, and is likely the L-shaped if growth rates do not surge in 2011. Even when I simulate the recovery for 3.5% annualized growth starting in Q3 2009 (07-09 B) which is above potential growth, the recovery remains very weak.