Click to enlarge.
This is a followup to the chart I posted yesterday.
February 3, 2012
Nonfarm Payroll Growth During Economic Expansions (Musical Tribute)
Click to enlarge.
Note what happens on or around the year 2018 in both charts.
Clearly both of these trends cannot continue. It would make no sense that jobs would be lost during economic expansions *and* jobs would be added during economic contractions (recessions). Of the two charts, the first is the most suspect if only from a common sense perspective. Jobs will more than likely not be added during future recessions. Further, that chart appears to be rolling over. I therefore do not trust its trend line (not that I ever actually trust trend lines).
I offer a somewhat tongue-in-check alternative theory that could also explain these two charts. Starting in the year 2018 we will enter a period of "greatest moderation". No jobs will be created during expansions and no jobs will be lost during recessions. We'll just muddle along indefinitely and without much to show for it other than a continually rising national debt and ever expanding food stamp program. Good times, good times.
Keep in mind, it is just a theory.
Source Data:
St. Louis Fed: Total Nonfarm Payrolls
NBER: US Business Cycle Expansions and Contractions
Real Treasury Yields: Like "The Gathering" From 'Highlander,' Only Worse
ReplyDeleteAnd the Fed doesn't have any more room to ease rates again, because short-term rates are near zero. All they can do is jawbone a rate hike further and further out into the future or offer to buy more bonds. And we already know where that tactic takes us. It takes us to Japan, circa 1989. Domo arigato, Mr. Chairman.
I figured the "greatest moderation" may require a choice Japanese quote.
Domo arigato indeed.
It's a dying economy crying out for fiscal stimulus that it is very unlikely to recieve.
ReplyDeleteRe: your 2018 convergence, I had the same though, though rather less tongue in cheek. Economists always deal in terms of equilibrium models, when if fact economic equilibrium is a myth, the vast majority of the time, in a money economy. It might have been a useful concept in the 10th century.
But it you are right, then equilibrium might be achieved in a go nowhere, do nothing economy.
Come to think of it, I guess my tongue id tucked up there somewhere, too.
Blecch!
JzB
Jazzbumpa,
ReplyDeleteI hear you. I think long-term stagnation is the most likely outcome for us, so in that sense what I wrote was only somewhat tongue-in-cheek.