Thursday, June 24, 2010

Fundamentals and the Recovery

On several occasions in the past, I have leaned on the Federal Reserve Bank of St. Louis for a graphical representation of the current state of the economic recovery. The last time around, about four months ago in Chart of the Week: A Broader Look at the U.S. Economic Recovery, I observed:

“Relative to previous recoveries, which typically follow a bottom that comes some 8-12 months after the top, the current recovery is by far the weakest in the 62 years of data for employment and real income. Industrial production has shown the sharpest rebound, but is still the weakest bounce in 62 years. The only one of the four indicators that is above the historical low is retail sales – yet even here the margin is a narrow one.”

Looking at an updated version of industrial production, income, employment, and retail sales, I am surprised by the signs progress. Now both industrial production and retail sales are near the historical averages for all a recoveries [prior graphs showed performance following a prior business cycle peak] and both employment and income have started to move above historical lows.

The data in the graphic below do not yet reflect the changes in the economy following the expiration of the federal housing tax credit, nor the recent developments in the European sovereign debt crisis. This is undoubtedly a weak recovery, but so far at least, not as bad as many feared it would be.

For more on related subjects, readers are encouraged to check out:


[source: Federal Reserve Bank of St. Louis]

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