I first want to begin by looking at the private sector as related to stock market performance and corporate profit growth. This recovery has been extremely strong in those measures and exceeds even the incredibly strong growth in these measures from the recovery from the 1981 recession. I have indexed the corporate profits back to the peak prior to the recession (since the 81 recession was a double dip, I took it back to the peak from just prior to the 1980 recession).
And for the stock market graph, I indexed the S&P 500 to the end of the recession (as opposed to the trough so as not to let our extremely low bottom skew the data).
As you can from these graphs, in the corporate profits and stock market, this recovery has been incredibly strong, but again much of these profits can be traced back to the job cuts and productivity gains that were undertaken during the recession. However, as long as growth continues and productivity remains high, it is likely that at least the corporate profits chart will remain on an upward trajectory (I will not make any stock market prognostications here however).
Also, while lagging the recovery from the 1981 recession, the current recovery is still fairly strong in terms of real retail sales and industrial production as can be seen below, while definitely lagging in capacity utilization (another harbinger of our productivity gains).
Retail Sales Indexed
Industrial Production Indexed
Capacity Utilization Indexed
Note that while our retail sales do lag the 80's recovery, they appear to be accelerating again at a pace that is very similar to the 80's recovery after a couple of pullbacks earlier in our recovery. So, while our recovery is definitely not as strong as the recovery from the 1981 recession (especially in terms of job creation), it isn't that far off in other measures and is actually outperforming that recovery in the corporate sector of the economy.
4 comments:
I appreciate your analysis but I must wonder why the 80s recovery was so vigorous absent the 2.3 trillion in Congressional stimulus over the last two years and the -at minimum - 3.3 trillion in Federal Reserve stimulus in a somewhat contiguous period covered in the recent Fed data dump. I mean, Reagan was running $200 to $300 billion deficits but the Fed was not helping out.
I mention this because the sheer size of the monetary outpouring has to dwarf all other factors this time around.
Oh, the fed was helping out greatly. Remember, they began lowering rates in 82 and that decline in rates (following the defeat of inflation) was able to really juice the economy going forward (coupled with the large deficits of the time).
We now face the problems of housing value collapse, 401k value collapse, as well as high unemployment.
The '82 recession didn't have either of the first two. Housing values hadn't gone up very much in most of the country in the 70's (except for inflation). Housing was ruined by enormous interest rates. When they came down, the stress was relieved. Similarly, retirement accounts did poorly in the 70s, so there was no precipitous drop in value.
This recession was substantially worse --- especially psychologically. The loss in home value & retirement plan value is the difference.
Saxman -
I'm not disputing that this recession was worse, but there's another way to look at it. The 80's recession was mainly resolved by releasing various stresses on the system -- high interest rates and a controlled deficit. We STARTED the '08 recession with sky-high deficits and rock-bottom interest rates.
Heart attacks are nastier when they hit 500-pound shut-ins vs. healthy runners. Our economy is called "fragile" because while it's improving, there isn't much health left to it to take another recession.
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