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« June 2009 Economics Newsletter Published | Main | Economic Effects of Climate Change »

June 10, 2009


mike p.

apart from general optimism (a glass-half-full outlook) i am curious why you might "forecast" a turning point... all of the data that you yourself present points toward continued economic contraction for the foreseeable future.

my own take: recovery is impossible in a falling wage/high unemployment environment. further, impact of gov't intervention (stimulus) will be muted within a global environment. i see inflation in the things we need need (food, fuel) and deflation in the things we want (wages, real estate, durables). US economy will eventually stabilize, but at a much lower level of activity... i.e. the contraction will be permanent and expectations for a "rebound" to past levels are wildly out-of-touch with reality.

oregon should be preparing for the worst possible scenario, not making bets on 'green shoots'.

Mike H

Isn't the unemployment rate a lagging indicator? Unless lagging by 9 months or so in close enough to 0 to be considered coincident, I don't see how it could be called coincident. Also, to Mike P., if recovery can't happen until wages and unemployment turned around, we would never make it out of a recession. Eventually, wages and unemployment would reach (or undershoot) equilibrium and then as the economy returns so will the jobs and wages.

Bill Conerly

Mike H: yes, unemployment is a lagging indicator, but employment is a coincident indicator. Employment is the headcount of people with jobs; unemployment is a more fluid concept, because it only counts people out of work who are actively looking for work. When employment rises, the discouraged people who were too discouraged to look for work start job hunting, raising unemployment.

Mike P: good question. The coincident indicators do not point to the future; they simply describe the present. My forecast of an improving economy is based on monetary policy and the rising savings rate. Mike H's comments are also appropriate.

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