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Saturday, January 18, 2014

Recovery Measures: Three out of Four Ain't Bad

by Calculated Risk on 1/18/2014 05:03:00 PM

Here is an update to four key indicators used by the NBER for business cycle dating: GDP, Employment, Industrial production and real personal income less transfer payments.

Note: The following graphs are all constructed as a percent of the peak in each indicator. This shows when the indicator has bottomed - and when the indicator has returned to the level of the previous peak. If the indicator is at a new peak, the value is 100%.

Three of the indicators are above pre-recession levels (GDP and Personal Income less Transfer Payments and Industrial Production).  Only employment is still below the  pre-recession peak.

GDP Percent Previous PeakClick on graph for larger image.

The first graph is for real GDP through Q3 2013.

Real GDP returned to the pre-recession peak in Q2 2011, and has hit new post-recession highs for ten consecutive quarters.

At the worst point - in Q2 2009 - real GDP was off 4.3% from the 2007 peak.

Personal Income less TransferThe second graph shows real personal income less transfer payments as a percent of the previous peak through the September report.

This indicator was off 8.2% at the worst point.

Real personal income less transfer payments surged in December 2012 due to a one time surge in income as some high income earners accelerated earnings to avoid higher taxes in 2013 (I've left December 2012 out going forward).   Real personal income less transfer payments are now above the pre-recession peak.

Industrial Production The third graph is for industrial production through December 2013.

Industrial production was off 16.9% at the trough in June 2009.

Now industrial production is 0.9% above the pre-recession peak. 

The final graph is for employment and is through December 2013.  This is similar to the graph I post every month comparing percent payroll jobs lost in several recessions.

Employment Three out of four indicators ain't bad, but employment is probably the most important indicator and unfortunately payroll employment is still 0.9% below the pre-recession peak.

Employment will probably be back to pre-recession levels in mid-2014.