Was the Great Recession More Damaging Than the Great Depression?: Over at the Milken Review

If you believe in the "plucking model", by which the economy when "plucked" into a state below normal employment by a negative shock then returns to normal, there is not strong reason to begin a recession watch until normal employment has resumed or has almost resumed. It has. So it is time to start a "what will cause the next recession?" watch. Tim Duy says: it will not be weakness in housing. I concur: the current weakness in housing is what the Federal Reserve wants to see, and is the intended effect of its raising interest rates—a little less employment in housing construction producing a little more room for higher employment in other sectors: Tim Duy: Decision Time: "Remember the recession calls in 2016 when manufacturing rolled over? The thinking was that every time industrial production falls by 2%, a recession followed, and this time would be no different. But it was different. Those calls did not play out because the shock was largely contained to that sector; recessions stems from shocks that hit the entire economy. And even if a recession could be boiled down to a single indicator, I would pick the yield curve over housing...


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