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Did it lag so much on the way down?

by Agathos 17y ago

SamAtt 17y ago
No, but it had been going down for a while before that so I'm not sure it counts (http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?series_id=LNS14000000 http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?series_i...) The beginning of this is generally considered to be the Collapse of Lehman brothers and the dissolutions of Bear Stearns and Merril Lynch which all happened in Sept. 2008. The Unemployment rate in Aug. '08 was 6.2% but that was already up from 4.7% in Aug. '07. So actually it was a predicting factor on the way down.
- enjo 17y ago
  The collapse of Lehman brothers and Stearns was itself a lagging indicator. The issues had already been pressing all the way back to 2007 (see 'housing bubble'). We had clear signs of a stalling economy well before these companies collapsed. The signal these collapses sent, really, was that this was going to be a deeper recession than we had originally hoped. I don't claim to understand all of this, but my wife (PhD economics) first started sending me warnings about serious economic issues in late 2007.
- sophacles 17y ago
  Remember in 2008 when we got tax rebates from Bush? Those were to get the economy going, based on the fact that we were entering a recession. It was a big worry. Unemployment at that point was < 5% too. In fact, I bought my house that summer, when housing prices were on the way down, but before the credit crunch made it impossible to get credit. We were already in a recession then, according to the news at the time anyway. The collapse of LB and BS et al, is something different, those were a big deal panic, associated with, but not the start of, the recession. They were the worsening of it. The actually interesting thing here is that we were told about the recession we were in for quite a while before the collapses, then we were told how we just got into a recession because of the collapses. Or have we always been at war with eastasia?
jordanb 17y ago
Yes. The recession began in late 2007. Unemployment didn't start spiking until mid-2008. What happens is that companies are not anxious to start laying off employees when the economy goes south, for a variety of reasons. So they start spreading less work among their existing workforce. Worker productivity and hours worked both go down. This makes these leading indicators. On the other end, when the economy starts winding up at the end of a recession, the now-lean companies aren't anxious to start hiring again. So instead they start giving their existing workforce more work, asking people to work more hours, etc. So you have the opposite: unemployment stays high for a while while productivity and hours spike. Worker productivity is currently "surging": http://news.google.com/news/search?aq=f&um=1&cf=all&ned=us&hl=en&q=worker+productivity http://news.google.com/news/search?aq=f&um=1&cf=all&... However, hours worked is "holding steady": http://news.google.com/news/search?aq=f&um=1&cf=all&ned=us&hl=en&q=average+weekly+hours+ http://news.google.com/news/search?aq=f&um=1&cf=all&... What that means, I'm not qualified to say. And it looks like real economists are (as always) of differing opinions on it. Ideally you'd want to see both of those indicators on the up-tick, but given that one is increasing and the other is not getting worse, it's probably a sign that unemployment is going to start going down here pretty soon.
- SamAtt 17y ago
  The problem I have with the "Late 2007" start date is it doesn't seem to be backed up with facts. GDP grew in Q1 2008 (http://useconomy.about.com/b/2008/04/30/still-not-a-recession-q1-2008-gdp-remains-at-6.htm http://useconomy.about.com/b/2008/04/30/still-not-a-recessio...) and Unemployment was flat from Dec. '07 to Jan '08 and actually went down a tick in Feb '08 (http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?series_id=LNS14000000 http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?series_i...) In fact, GDP continued to grow in Q2 of 2008 (albeit slower) and in Apr. of '08 the Unemployment rate was at 5% (up a mere .1% from Dec. '07). I was always taught that a recession is 2 quarters of negative GDP growth. Lately that definition has changed to "when economists say the recession began based on rules they made up". The problem with that measuring stick is you are defining behavior based on rules that are supposed to measure behavior. If you've decided the unemployment rate is a lagging factor than you define the Recession as having started earlier so that it fits the rule. The reality is GDP didn't start to fall until Q3 of '08 and Unemployment had been going up steadily since Apr. of '08 (a full 3 months before the start of Q3). In my book that isn't a lagging sign.

Did it lag so much on the way down?

by Agathos 17y ago

Did it lag so much on the way down?

No, but it had been going down for a while before that so I'm not sure it counts (http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?series_id=LNS14000000 http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?series_i...) The beginning of this is generally considered to be the Collapse of Lehman brothers and the dissolutions of Bear Stearns and Merril Lynch which all happened in Sept. 2008. The Unemployment rate in Aug. '08 was 6.2% but that was already up from 4.7% in Aug. '07. So actually it was a predicting factor on the way down.

enjo 17y ago
The collapse of Lehman brothers and Stearns was itself a lagging indicator. The issues had already been pressing all the way back to 2007 (see 'housing bubble'). We had clear signs of a stalling economy well before these companies collapsed. The signal these collapses sent, really, was that this was going to be a deeper recession than we had originally hoped. I don't claim to understand all of this, but my wife (PhD economics) first started sending me warnings about serious economic issues in late 2007.
sophacles 17y ago
Remember in 2008 when we got tax rebates from Bush? Those were to get the economy going, based on the fact that we were entering a recession. It was a big worry. Unemployment at that point was < 5% too. In fact, I bought my house that summer, when housing prices were on the way down, but before the credit crunch made it impossible to get credit. We were already in a recession then, according to the news at the time anyway. The collapse of LB and BS et al, is something different, those were a big deal panic, associated with, but not the start of, the recession. They were the worsening of it. The actually interesting thing here is that we were told about the recession we were in for quite a while before the collapses, then we were told how we just got into a recession because of the collapses. Or have we always been at war with eastasia?

jordanb 17y ago

Yes. The recession began in late 2007. Unemployment didn't start spiking until mid-2008. What happens is that companies are not anxious to start laying off employees when the economy goes south, for a variety of reasons. So they start spreading less work among their existing workforce. Worker productivity and hours worked both go down. This makes these leading indicators. On the other end, when the economy starts winding up at the end of a recession, the now-lean companies aren't anxious to start hiring again. So instead they start giving their existing workforce more work, asking people to work more hours, etc. So you have the opposite: unemployment stays high for a while while productivity and hours spike. Worker productivity is currently "surging": http://news.google.com/news/search?aq=f&um=1&cf=all&ned=us&hl=en&q=worker+productivity http://news.google.com/news/search?aq=f&um=1&cf=all&... However, hours worked is "holding steady": http://news.google.com/news/search?aq=f&um=1&cf=all&ned=us&hl=en&q=average+weekly+hours+ http://news.google.com/news/search?aq=f&um=1&cf=all&... What that means, I'm not qualified to say. And it looks like real economists are (as always) of differing opinions on it. Ideally you'd want to see both of those indicators on the up-tick, but given that one is increasing and the other is not getting worse, it's probably a sign that unemployment is going to start going down here pretty soon.

SamAtt 17y ago
The problem I have with the "Late 2007" start date is it doesn't seem to be backed up with facts. GDP grew in Q1 2008 (http://useconomy.about.com/b/2008/04/30/still-not-a-recession-q1-2008-gdp-remains-at-6.htm http://useconomy.about.com/b/2008/04/30/still-not-a-recessio...) and Unemployment was flat from Dec. '07 to Jan '08 and actually went down a tick in Feb '08 (http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?series_id=LNS14000000 http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?series_i...) In fact, GDP continued to grow in Q2 of 2008 (albeit slower) and in Apr. of '08 the Unemployment rate was at 5% (up a mere .1% from Dec. '07). I was always taught that a recession is 2 quarters of negative GDP growth. Lately that definition has changed to "when economists say the recession began based on rules they made up". The problem with that measuring stick is you are defining behavior based on rules that are supposed to measure behavior. If you've decided the unemployment rate is a lagging factor than you define the Recession as having started earlier so that it fits the rule. The reality is GDP didn't start to fall until Q3 of '08 and Unemployment had been going up steadily since Apr. of '08 (a full 3 months before the start of Q3). In my book that isn't a lagging sign.