Thursday, February 4, 2010

Another Quarter, Same Story

Here is an update of Figure 7 from my Feb 2009 NBER working paper.

Of particular interest is the fact that the labor market distortion shows no signs of getting better in Q4. The basic patterns of this recession I identified at the end of 2008 (based on data through 2008 Q3) have continued for 5 consecutive quarters.

Until the labor distortion turns around, employment could continue down while real GDP rises. The good news is that, based on consumer spending patterns during 2008 and 2009, it appears the labor distortion will stop getting worse in 2010 Q1 (I view consumer spending as a forecasting variable, not necessarily having a causal effect on employment: see my Jan 2010 NBER wp).

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