links for 2009-10-18
*Sigh* Last Post on Superfreakonomics, I Promise

James Hamilton Is Mostly Optimistic

"No L"--Merry Christmas--he says:

Econbrowser: No L: I first called attention on April 9 to the regularity that a peak in new claims for unemployment insurance usually means that a recovery from the recession will begin within two months.... [T]he last few weeks have confirmed the pattern of a significant drop in unemployment claims typical of economic recovery. Unfortunately, the level remains high enough that net job growth is likely still quite negative.... On Friday we received two quite favorable indicators from the Federal Reserve. The first is that the nation's capacity utilization rate has been steadily climbing since June. Calculated Risk regards that as another reliable indicator that the recession is over.... Even more encouraging was the Fed's report that its index of industrial production rose by 0.7% in the month of September and at a 5.2% annual rate during the third quarter. Paul Krugman thinks that could mean a third-quarter GDP annual growth rate above 4%.

That kind of growth is inconsistent with a jobless recovery. After the 2001 recession, we didn't see a GDP growth rate of that size until 2003:Q3. There are two separate feedback mechanisms operating. The first is that rapidly rising output will eventually bring hiring up with it. The second is that the high unemployment rates will bring more foreclosures and cause spending and output to sputter.

Which is it going to be? Nonfarm payroll employment is the key indicator to watch from here.

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