Econosseur: business cycles, recession, bubbles Archives

Unemployment duration: 60-year high

By Richard W. Evans on September 25, 2009 12:58 AM | 2 Comments | No TrackBacks

Dan Hamermesh is currently visiting BYU as an invited seminar speaker. I was showing him my picture of the normalized peak plot of employment in the last 14 recessions, and he told me about another labor fact from this recession that astounded me. Look at the picture below of average duration of unemployment in the U.S. since 1947. The average unemployment duration for everyone who said they were unemployed in August 2009 was 25 weeks (nearly 6 months). Compare that to the average of about 15 weeks between 1976 and 1992. This is the 60-year record in the U.S.

Continue reading Unemployment duration: 60-year high.

Dilbert: Not sugar coated

By Richard W. Evans on September 20, 2009 11:06 PM | 1 Comment | No TrackBacks

My 9-year-old son showed me this today, and we laughed our heads off together.

American Time Use Breakdown

By Richard W. Evans on August 24, 2009 12:17 AM | 3 Comments | No TrackBacks

Score another one for the New York Times interactive graphics department. [Thanks to Jason for bringing this to my attention.] They wrote a cool little article highlighting the differences between how the unemployed and employed use their time in a given day using the American Time Use Survey (ATUS) for 2008, which includes data from our current recession. The best part is the interactive graphic (shown below) that allows you to see what percentage of people in the given classification are doing each different activity each minute of the average day.

Continue reading American Time Use Breakdown .

Housing, Geithner, and The Daily Show

By Richard W. Evans on July 31, 2009 12:11 PM | 3 Comments | No TrackBacks

Greg Mankiw posted this video sketch yesterday from The Daily Show on a major signal that the housing market has not yet stabilized. Hilarious! My favorite part is when Robert Shiller starts giving advice on how Geithner should redecorate his bathroom.

The Daily Show With Jon Stewart

Mon - Thurs 11p / 10c

Home Crisis Investigation

www.thedailyshow.com

Daily Show
Full Episodes

Political Humor

Joke of the Day

Dilbert: What do we have to worry about?

By Richard W. Evans on July 5, 2009 5:53 PM | No TrackBacks

My son found this for me in today's Sunday comics.

Updated employment situation

By Richard W. Evans on July 2, 2009 10:41 AM | 1 Comment | No TrackBacks

The employment numbers that came out today show that the economy is still in the process of gearing down. The normalized peak plot below shows U.S. employment levels as a percentage of their peak level in the last 14 recessions back to the Great Depression (dark black line). Employment in our current recession (the heavy lime green line) is 4.7% lower than its peak back in December 2007. The only recession that looks like this since the Great Depression is the post WWII reduction in spending in 1945. It looks like the recession still has some room to run. Similar comparisons of GDP and stock prices are in my post from a month ago.

Relative size of the U.S. recession now

By Richard W. Evans on May 29, 2009 3:20 PM | No TrackBacks

Back in March, I wrote a piece entitled, "Overall economy not as bad... relatively" in which I graphically compared the current U.S. recession with the previous 13 recessions including the Great Depression. In that post, I concluded that the recession at that time was not the biggest since the Great Depression. This current post presents updated graphics and provides evidence that this is now the biggest U.S. recession since the big one at the beginning of the 1930s.

Continue reading Relative size of the U.S. recession now.

Leamer and the state of macro

By Richard W. Evans on May 20, 2009 12:23 AM | No TrackBacks

(Pardon the long post, but this is a topic that I love.) Adding another post to a topic that Jason and I have discussed often both on and off this blog (post 1, post 2), I wanted to post a link to a podcast interview with Ed Leamer on EconTalk. Leamer is a renowned economist in international trade and econometrics. Russ Roberts' interview with Leamer is interesting and insightful, and I recommend it as a good listen. But I finished the podcast feeling very confused. Leamer argues both that current macroeconomics does a terrible job at explaining the data and at having a story to explain the data. This is not an inditement, but rather a good indirect description of the two current ways of approaching macroeconomics.

Continue reading Leamer and the state of macro.

International Economic Update: Dallas Fed

By Richard W. Evans on May 7, 2009 10:17 PM | 2 Comments | No TrackBacks

The May edition of the International Economic Update from the Globalization and Monetary Policy Institute at the Federal Reserve Bank of Dallas was released on Monday. Two points stand out to me: (1) The global growth forecasts are less optimistic than most U.S. forecasters (e.g., Ben Bernanke), and (2) the ranking of countries by relative size of fiscal stimulus in 2009 puts the U.S. a little further from the top than I expected.

Continue reading International Economic Update: Dallas Fed.

Tomorrow's Reports

By Jason DeBacker on May 6, 2009 6:38 PM | No TrackBacks

It's like Christmas eve... but not. And "Santa" has been dropping some hints. Here's a preview of what's coming tomorrow regarding the "Stress Tests".

Despite the leaks, I still expect some market reaction. Why? I don't know how to write down a rigorous model of it, but it seems like expectations are perceived differently from certainties, even if the expectations are correct.

I thought Michigan was a "blue" state?

By Jason DeBacker on April 15, 2009 3:29 PM | 2 Comments | No TrackBacks

A great animated map on the employment situation, from Slate.

Thanks to Bart-man for the link.

The Microeconomics of Business Cycles

By Jason DeBacker on April 7, 2009 10:44 AM | No TrackBacks

I've read a couple excellent articles in the last two days. First, a piece by Nobel Laureate Vernon Smith and Steven Gjerstad in the Wall Street Journal. And today, a fine work by Mario Rizzo of NYU.

Gjerstad and Smith outline how the increase in consumer debt that results from a fall in home prices can lead to huge losses for the financial sector and severe recessions. They point out how the losses from the stock market couldn't have caused the Great Depression (the timing wasn't right), but how the fall in home prices caused many banks to fail. They also ask the great question- how did a $10 trillion fall in equity values from the Dot-com bubble not result in financial troubles even close to the levels we've seen after a $3 trillion dollar fail in home values? Their conclusion is basically that homes are much more leveraged than stocks and thus the financial sector takes huge losses when home values fall.

Continue reading The Microeconomics of Business Cycles.

The International Bailout Arms Race, continues?

By Jason DeBacker on March 27, 2009 9:51 AM | 2 Comments | No TrackBacks

More on the international bailout arms race. I guess some people know when to hold 'em and when to fold 'em:

"First, in an interview for Monday's Wall Street Journal (no-subscription-required summary here), Jean-Claude Trichet, head of the European Central Bank, said that no new measures are needed to combat the global economic crisis. Then Mirek Topolanek, the prime minister of the Czech Republic and the president (in this rotation) of the European Union called the U.S. emphasis on fiscal stimulus "the way to hell.""

St. Patrick's Day Leprechaun Bailout

By Richard W. Evans on March 18, 2009 1:41 PM | No TrackBacks

Greg Mankiw posted this link yesterday (3/17/09, St. Patrick's Day) to another funny Flash video from the folks at JibJab--Leprechaun Bailout.

Utah doing pretty well... relatively

By Richard W. Evans on March 14, 2009 1:23 AM | No TrackBacks

I spoke two nights ago at a meeting of the Timp Valley (Utah County) chapter of the International Association of Administrative Professionals (IAAP). In preparing for the presentation, I gathered some information on the Utah economy. I was surprised to see how well Utah is doing relative to the rest of the country.

Continue reading Utah doing pretty well... relatively.

Overall economy not as bad... relatively

By Richard W. Evans on March 12, 2009 4:24 PM | No TrackBacks

The following three graphs brought me to the conclusion that changed my perspective on the relative size of our current recession in the United States. You often hear that the current recession is the most severe since the Great Depression. However, when you actually go to the data, that is only the case if you look exclusively at the financial sector.

Continue reading Overall economy not as bad... relatively.

Sorting out inflation risks: debunking Beck

By Richard W. Evans on March 10, 2009 2:07 AM | No TrackBacks

I couldn't resist posting and responding to this Glenn Beck video (1/29/09) because I know that he has been advised by multiple parties against the arguments that he is pushing. We all should have reason to be worried about the economy, but not for the reasons Beck is trumpeting.

Continue reading Sorting out inflation risks: debunking Beck.

The data don't tell a happy story

By Richard W. Evans on March 2, 2009 9:34 AM | 1 Comment | No TrackBacks

Calculated Risk posted a series of very ominous graphs on Saturday showing just how bad things are in this recession. Almost as startling as the depth of our current troubles is how far above normal things were two years ago.

As I have argued before, the reason why this is a global recession--and not confined primarily to the U.S.--is the same reason that allowed the bubble to get so big. The financial instruments that were based on the U.S. real estate market got stamped AAA by S&P and Moody's and went around the world as low-risk, high-return investments. This further fueled the bubble while broadening the scope of what would turn out to be the biggest world economic downturn since the 1930s.

Finally, some forecasts I can swallow

By Richard W. Evans on March 1, 2009 8:57 AM | No TrackBacks

The New York Times ran an editorial today entitled, "When Will the Recession Be Over?" that surveyed 11 experts about their forecasts of when the recession would end. This is the first mainstream compilation of forecasts that I have felt was realistic.

Continue reading Finally, some forecasts I can swallow.

Subprime reading

By Jason DeBacker on February 26, 2009 1:56 PM | No TrackBacks

I've read two good pieces on the subprime crisis this week:

1) Gary Gorton's "The Panic of 2007" provides detailed statistics on the mortgage market and a nice (albeit technical) description of how the mortgages were securitized. He documents the incredible increase in subprime and Alt-A mortgages (going from 3% and 1% of the MBS in market in 2001 to 12% and 13% in 2006). And the increasing securitization of mortgages (50% of subprime mortgages were securitized in 2001- this grew to 80% in 2006). While Gorton certainly isn't making this point, you could see how that in real time, someone stuck in an office in New York or DC would be very excited about these new ways to package debt and the increasing ease with which people could buy a home. Think of Greenspan's quote from 2005;

"Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country ... With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers."

2) "The End", by Michael Lewis, is also about the mortgage market but is more a story of the characters behind it. I particularly liked Lewis' description of the work Steve Eisman and his colleagues put in to see what was going wrong. They saw the numbers that Gorton presents, and thought something must be out of whack, but at first they weren't exactly sure why these things were happening. To reaffirm what they were seeking in the data, they made visits to South Florida (to see the housing bubble first hand) and talked with those who were securitizing mortgages. Both highlighted the insufficient regard for the risks being taken. Although Lewis doesn't explain exactly why things went so wrong, he'll make you wish you were in the trenches trying to figure it out back in 2005-2007.

Only difference from Great Depression is monetary policy and TARP

By Richard W. Evans on February 12, 2009 5:22 PM | No TrackBacks

The only significant policy difference between the current period of global recession and the Great Depression is monetary policy and financial market intervention. The government spending part is looking like it will be the same. The annual deficit is projected to rise from its current 2008 level of just under 3% of GDP to potentially 10% of GDP in 2009. However, this rise in the deficit is also similar to the early 1980s and 2000. (The big blip is World War II.)

Continue reading Only difference from Great Depression is monetary policy and TARP.

Slippery slope argument against the TARP

By Richard W. Evans on February 12, 2009 4:18 PM | No TrackBacks

Back in October 2008, I was a member of a panel discussion hosted by the BYU Economics Department that was tasked with explaining different aspects of the financial crisis up to that point and answering questions from the audience. Each member of the panel, myself included, supported the government's role in bailing out U.S. banks and financial companies citing the systemic role they play in the world economy (see my post 1 and post 2). However, since the crisis began in October 2008, two of my colleagues have consistently made what I see as the only good argument against the TARP financial bailout program--the slippery slope costs will outweigh the systemic risk reduction benefits.

Continue reading Slippery slope argument against the TARP.

John Cochrane: public prayer instead of fiscal stimulus

By Richard W. Evans on January 29, 2009 3:38 PM | 1 Comment | No TrackBacks

John Cochrane had the following great quote in his insightful article, "Fiscal Stimulus, Fiscal Inflation or Fiscal Fallacies?"

"Others say that we should have a fiscal stimulus to 'give people confidence,' even if we have neither theory nor evidence that it will work. This astonishingly paternalistic argument was tried once with the TARP. Nobody could say how it would work in any way that made sense, but it was supposed to be important do to something grand to give people 'confidence.' You see how that worked out. Public prayer would work better and cost a lot less."

We have commented before on John Cochrane's uncanny ability to deliver biting rebuttals when challenged.

(Thanks to Mark Showalter for sending me this.)

The Bailout Game

By Richard W. Evans on January 28, 2009 5:02 PM | No TrackBacks

Greg Mankiw posted a link to The Bailout Game this morning, and I couldn't resist putting it up here and on our economic jokes page. Here are a couple of tips for the game. When you get to AIG, don't bail them out and watch what happens. Also, you might enjoy the comments on the little ticker at the bottom of the page.

Stocks are looking scarier than I thought

By Richard W. Evans on January 28, 2009 1:07 AM | 4 Comments | No TrackBacks

The Wall Street Journal ran a story yesterday entitled, "Central Banks are Creatures of Financial Crises" in which Justin Lahart showed a graphic that has been popping up from time-to-time over the last four months. It is a picture of the DJIA today mapped on top of the DJIA from the Great Depression with the peak levels lined up and normalized to 1. The story goes that the current downturn in stock prices looks a lot like the Great Depression, therefore we are at risk of a depression in the current crisis. I thought this might be the fallacy of cum hoc ergo propter hoc in that the Dow probably drops like it has currently in all recessions (including the Great Depression). But the graph below has changed my mind.

Continue reading Stocks are looking scarier than I thought.

Jake and Amir on the economic crisis

By Richard W. Evans on January 27, 2009 1:28 AM | No TrackBacks

Do you ever get tired of talking about the economic crisis? I think Jake does in this video.

Stimulus debate: multipliers, crowding out, and discounting

By Richard W. Evans on January 22, 2009 5:05 PM | No TrackBacks

Jason had a great post a week-and-a-half ago about the stimulus debate. The debate as it stands right now in the newspapers, media, and blogs centers on the questions about the effect of government intervention (spending increases and tax cuts) on the economy in the short-run and in the long-run. Jason's comments were similar to those of Robert Barro (Harvard) in today's Wall Street Journal in making the case for multipliers on government spending and taxation being much lower than is being estimated by members of the Obama economic team. Barro focused on the government spending multiplier being close to zero, and Jason argued that the tax multiplier is bigger than the government spending multiplier. However, I think that the correct answer to the optimal amount of government intervention must incorporate more dynamic effects that balance any short-run benefits of intervention with long-run costs. It is, therefore, a question about how society discounts the future.

Continue reading Stimulus debate: multipliers, crowding out, and discounting.

More countries hitting limit in bailout arms race

By Richard W. Evans on January 22, 2009 3:51 PM | No TrackBacks

The second post ever posted on this blog in October 2008 is entitled, "International bailout arms race." I characterized the flush of bailout commitments that we saw across almost every major developed country as a strategic optimal response in the face of the bailout plans of the United States. With this model in mind, I predicted that the bailouts would develop into a situation similar to the nuclear arms race of the 1980s in which the U.S. defeated Russia by outspending them on weapons. The same thing is happening now as predicted among developed countries with respect to bailouts. The list of countries hitting their spending capacity and "folding their hand" started with Iceland and Hungary, and now looks to include Spain, Greece, Ireland, Germany, the U.K., Belgium, and the E.U. as a whole (see Iceland/Ireland joke).

Continue reading More countries hitting limit in bailout arms race.

Market Timing

By Jason DeBacker on January 22, 2009 10:40 AM | No TrackBacks

I was pretty inactive here from mid December-early January. During this time I was preparing for and attending the annual ASSA meetings, where many first-round interviews for economics PhDs are held.

The following chart highlights my amazing ability to time the market. The shaded areas represent NBER recessions, the first vertical red line is the date I graduated from college, the second is the date that I completed graduate school.

Continue reading Market Timing .

Inaugural business cycles: no counterfactual

By Richard W. Evans on January 21, 2009 2:01 PM | No TrackBacks

Before I switched from MSNBC to CNN for coverage of yesterday's historic inauguration of Barack Obama as President of the United States, one of the MSNBC commentators said something that piqued my interest. He said that the only good examples of a President entering office in a recession before Barack Obama are Ronald Reagan (1981) and Franklin Delano Roosevelt (1933). Further the commentator contrasted Reagan's promise to decrease the size of government with FDR's commitment to increase the size of government. However, the following picture shows that Reagan is not the correct counterfactual.

Continue reading Inaugural business cycles: no counterfactual.

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