About that Robust Recovery
Looks like James Hamilton, after peering into his tea leaves, is going coming to conclude that a robust recovery is not going to happen, at least given the data so far.
Since the beginning of April, we’ve been discussing one potentially favorable indicator in the form of new claims for unemployment insurance. In each of the last 6 recessions, the 4-week average of this series reached a peak less than 8 weeks before the economic recovery began. None of the readings over the last 8 weeks exceeded the value reached April 9, consistent with the hypothesis that we are past the peak in new claims for this cycle.
In other words, if the pattern holds that we’ve seen in the last 6 recessions we may be at the low point in the recession, and that the economy might start growing again. Note I said might.
Now that is good news, but Prof. Hamilton looks at the data and concludes that the recovery isn’t looking to be all that great.
On the other hand, the most recent values for initial unemployment claims have not shown further improvements. Although the number released on Thursday was widely reported in the press as a drop in the number of new claims, it actually resulted in a slight increase in the 4-week average, putting the latter pretty much back where it was 4 weeks ago. If we were really beginning a recovery similar to that experienced in previous episodes, we should be seeing sharper drops in this number at this point.
Prof. Hamilton looks at a host of other indicators and while one could point to slight improvements things are still pretty far off in terms of a robust recovery. Now, things could change, but given the data we have it is looking unlikely that we will have robust growth.