“All economic news is good news”

Don’t ask me why a George F. Will quote from the mid-eighties has stuck with me all these years, but here it is in full:   “All economic news is bad news.  All economic news is good news.”  True in the old-time Phillips-curve-tradeoff sense that rapid growth may be inflationary, true  in the modern sense that the current depression (or recession, if you insist) is forcing households to live within their means, which is good for them but bad for GDP, etc.  Lately there’s been a spate of economic news, mostly bad (reduced bank lending, weakening credit outlooks for the G-7 governments, tumbling house prices, foreclosures as far the eye can see, GM’s bankruptcy filing, etc.), but a few top business economists and at least one top academic economist are saying the recession is over, or just a couple months away (Financial Times, 4 June).

The academic optimist is Robert J. Gordon, long established as one of the world’s leading empirical economists.  Gordon bases his prediction on new unemployment claims, which may have already peaked a few weeks ago at almost 660,000 a week, based on data ending May 23.  Past cycles typically reached their trough four to six weeks after the peak of new unemployment claims.   Assuming that this recession is typical enough to follow that pattern (eh), Gordon says the contraction either ended last month or will end this month.

U.S. manufacturing orders were the other major ground for optimism mentioned in the FT article.  The ISM manufacturing survey showed a slight expansion in new factory orders, the first expansion since the recession begain in December 2007.  The article also noted that U.S. consumer confidence, as measured by the Conference Board, increased significantly from April to May (from 40 to 54.9, which is still well below the benchmark value of 100) and that “housing has bottomed in volume terms even if prices are still falling.”

Today’s unemployment news — U.S. unemployment rose again, from 8.9% to 9.4% — will be shrugged off by some as a “lagging indicator,” as it is true that unemployment often continues to rise even after GDP starts to grow again and the National Bureau of Economic Research declares the recession over.  (Remember how often the recoveries of the early-to-mid 1990s and 2000s were referred to as “jobless recoveries”?)  I personally would like to see a more employment-centric measure of recessions and expansions, but I guess you could create one easily enough from the BLS employment figures.


One Response to ““All economic news is good news””

  1. democommie Says:


    I heard a few minutes of your radio address to the Indigenous Peoples of Syracuse and Central NY on friday. I thought it was quite good. I just wish you had said, when asked for your last comments, “Kn I haz million dollurz?”

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