Quick takeaways from the ECRI Mar-13 presentation

I was reading through ECRI’s Mar-13 presentation called “U.S. Business Cycle in the Context of the Yo-Yo Years” (text available on http://econintersect.com/wordpress/?p=34109). I don’t think that I got the full import of the presentation because I don’t think that the presentation conclusively proved that we are in the so-called Yo-yo years where markets are becoming more volatile.

Nonetheless, below are very cool things that I did not know.

  • 2% GDP growth is roughly the stall-speed for the U.S. economy, and it very susceptible to recessions once it reaches the level
  • Coincident indicators that ECRI looks at are –
    • Employment (more of “following” indicator, because firms are slower to hire and fire, I think)
    • Industrial Production
    • Personal Income
    • Sales
  • It’s hard to call recession in real-time because of probability of significant upward revisions in estimates of the indicators in the run up to the peak and downward revisions in those indicators AFTER the peak. ECRI says that in April-AUg of 2008, the average downward revision was 140k jobs/month. This was just the revision; by a way of comparison, the latest NFP report said that the U.S. added 88k jobs in March.
  • One of the reasons that people are debating whether we indeed are in a recession or not is the rocking stock market. ECRI says that 1980, 1945 and 1924 recessions were accompanied by a rising stock market too, so we have seen this movie before.
  • ECRI (in collaboration with Journal of Commerce) looks at commodity prices that are both exchange traded and those that are not, and finds that the rise in prices have happened exclusively in the the exchange-traded market implying that the rise is driven by liquidity and not strong underlying demand.

 

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