by Bill McBride on 10/16/2012 09:05:00 PM
Tuesday, October 16, 2012
An update from economists Carmen Reinhart and Kenneth Rogoff at Bloomberg: Sorry, U.S. Recoveries Really Aren’t Different
Five years after the onset of the 2007 subprime financial crisis, U.S. gross domestic product per capita remains below its initial level. Unemployment, though down from its peak, is still about 8 percent. Rather than the V- shaped recovery that is typical of most postwar recessions, this one has exhibited slow and halting growth.Ouch!
This disappointing performance shouldn’t be surprising. We have presented evidence that recessions associated with systemic banking crises tend to be deep and protracted and that this pattern is evident across both history and countries. Subsequent academic research using different approaches and samples has found similar results.
Recently, however, a few op-ed writers have argued that, in fact, the U.S. is “different” and that international comparisons aren’t relevant because of profound institutional differences from one country to another. ... We have not publicly supported or privately advised either campaign. We well appreciate that during elections, academic economists sometimes become advocates. It is entirely reasonable for a scholar, in that role, to try to argue that a candidate has a better economic program that will benefit the country in the future. But when it comes to assessing U.S. financial history, the license for advocacy becomes more limited, and we have to take issue with gross misinterpretations of the facts.
And their conclusion:
The most recent U.S. crisis appears to fit the more general pattern of a recovery from severe financial crisis that is more protracted than with a normal recession or milder forms of financial distress. There is certainly little evidence to suggest that this time was worse. Indeed, if one compares U.S. output per capita and employment performance with those of other countries that suffered systemic financial crises in 2007-08, the U.S. performance is better than average.On Wednesday:
• At 7:00 AM, the Mortgage Bankers Association (MBA) will release the mortgage purchase applications index.
• At 8:30 AM, Housing Starts for September will be released. The consensus is for total housing starts to increase to 765,000 (SAAR) in September, up from 750,000 in August.
Another question for the October economic prediction contest (Note: You can now use Facebook, Twitter, or OpenID to log in).
Posted by Bill McBride on 10/16/2012 09:05:00 PM