Depending on How We Define "Recovery," the US Economy Has Already Recovered, May Recover Soon, or May Never Do So

According to the latest public opinion poll from CNNMoney, 61 percent of Americans think it will this slideshow for charts and analysis of the latest GDP revisions.)
take three more years for the U.S. economy to recover fully from the Great Recession. Only 3 percent think that it has already recovered, while 16 percent think it will never recover. And that was before last week’s news from the Bureau of Economic Analysis, which revised growth for the first quarter of 2014 downward to minus 2.9 percent. (See

Are the opinions of those who responded to the poll reasonable? How do their views stack up against those of professional economists?

What is a “recovery”?

The logical way to start this post would be to cite an official definition of “economic recovery,” but it turns out there isn’t one.  The Business Cycle Dating Committee of the National Bureau of Economic Research, which is the group that calls the economy’s cyclical turning points, does not use the term “recovery” at all. In the committee’s words, “a recession is a period between a peak and a trough, and an expansion is a period between a trough and a peak.” That leaves no room anywhere for “recovery.” >>>Read more

According to the latest public opinion poll from CNNMoney, 61 percent of Americans think it will take three more years for the U.S. economy to recover fully from the Great Recession. Only 3 percent think that it has already recovered, while 16 percent think it will never recover. And that was before last week’s news from the Bureau of Economic Analysis, which revised growth for the first quarter of 2014 downward to minus 2.9 percent. (See this slideshow for charts and analysis of the latest GDP revisions.)
Are the opinions of those who responded to the poll reasonable? How do their views stack up against those of professional economists?
What is a “recovery”?
The logical way to start this post would be to cite an official definition of “economic recovery,” but it turns out there isn’t one.  The Business Cycle Dating Committee of the National Bureau of Economic Research, which is the group that calls the economy’s cyclical turning points, does not use the term “recovery” at all. In the committee’s words, “a recession is a period between a peak and a trough, and an expansion is a period between a trough and a peak.” That leaves no room anywhere for “recovery.”
- See more at: http://www.economonitor.com/dolanecon/2014/06/30/when-will-the-economy-recover-what-does-economic-recovery-mean-anyway-public-and-professional-views/#sthash.PtfTh8YV.dpuf

According to the latest public opinion poll from CNNMoney, 61 percent of Americans think it will take three more years for the U.S. economy to recover fully from the Great Recession. Only 3 percent think that it has already recovered, while 16 percent think it will never recover. And that was before last week’s news from the Bureau of Economic Analysis, which revised growth for the first quarter of 2014 downward to minus 2.9 percent. (See this slideshow for charts and analysis of the latest GDP revisions.)
Are the opinions of those who responded to the poll reasonable? How do their views stack up against those of professional economists?
What is a “recovery”?
The logical way to start this post would be to cite an official definition of “economic recovery,” but it turns out there isn’t one.  The Business Cycle Dating Committee of the National Bureau of Economic Research, which is the group that calls the economy’s cyclical turning points, does not use the term “recovery” at all. In the committee’s words, “a recession is a period between a peak and a trough, and an expansion is a period between a trough and a peak.” That leaves no room anywhere for “recovery.”
- See more at: http://www.economonitor.com/dolanecon/2014/06/30/when-will-the-economy-recover-what-does-economic-recovery-mean-anyway-public-and-professional-views/#sthash.PtfTh8YV.dpuf

Revisions for Q1 Show Biggest Drop in US GDP in Five Years

The third estimate of U.S. real GDP for Q1 2014, released this week by the Bureau of Economic Analysis, showed that the economy contracted at a 2.9 percent annual rate in the quarter. That was the fastest rate of contraction since the recovery began five years ago. The second estimate, released in May, had indicated a rate of contraction of just 1 percent.

The pause in the economic expansion had several causes. Unusually severe winter weather hurt the economy across the board. Exports, which had been a positive factor through most of the recovery, slowed sharply in the first quarter. A decrease in inventories adversely affected investment. Finally, although personal consumption continued to grow, the rate was slower than previously estimated, in part because of technical changes in the measurement of spending on healthcare.

The third revision confirmed a sharp decrease in corporate profits that had been reported previously. Profits fell by more than 9 percent before taxes, and nearly as much after taxes. Despite the drop, after-tax profits, which had been running at record levels in recent years, are still higher than the peak reached during the prerecession boom.

Observers believe that many of the factors leading to the first quarter decline in GDP are temporary. Relatively strong labor market performance during April and May make it very likely that growth will resume in Q2. Still, the weakness early in the year has caused the Federal Reserve to reduce its forecast of growth for the full year from a range of 2.8 to 3.0 percent down to a range of 2.1 to 2.3 percent.

Follow this link to view or download a classroom ready slideshow with additional charts and analysis of the Q1 2014 national income accounts.

Does Inherited Wealth Really Help the Economy? A Reply to Greg Mankiw

Writing for the Upshot section of the New York Times, Harvard economist Greg Mankiw has weighed
in on the Pikkety debate. He accepts Pikkety’s scenario of ever increasing inequality as at least a “provocative speculation,” if not established fact, but then asks, So what? What is wrong with inequality and inherited wealth?

Nothing, says Mankiw. In fact, he maintains that if we consider not only the direct effects on the family but also the indirect effects on the broader economy, inherited wealth is good not just for the rich but for the rest of us as well:

When a family saves for future generations, it provides resources to finance capital investments, like the start-up of new businesses and the expansion of old ones. Greater capital, in turn, affects the earnings of both existing capital and workers.
Because capital is subject to diminishing returns, an increase in its supply causes each unit of capital to earn less. And because increased capital raises labor productivity, workers enjoy higher wages. In other words, by saving rather than spending, those who leave an estate to their heirs induce an unintended redistribution of income from other owners of capital toward workers.

This may be good textbook economics, but it should not be allowed to pass without three major caveats. >>>Read more

The Roll of Bloggers in Disseminating Economic Research

Recently Bill Gardner, a contributor to the healthcare policy blog The Incidental Economist, posted a piece titled “Disseminating Research: Translators Needed.” His comments are relevant to economics in general, not just healthcare policy. I would like to pass them along and add some of my own.

Gardner writes:

Most research papers are rarely read, few are cited, and very few directly influence the policy decisions that they are meant to inform. How can we  get our data out of the journals and into the public square?
Articles in specialist journals are largely inaccessible to non-specialists, even other scientists. The field needs translators, great researcher/writers like Atul Gawande, who can take research findings and restate them in a way that connects the data to the concerns of the educated lay reader.

Gawande is a practicing surgeon who is a staff writer for the New Yorker. I’m not sure who the equivalent would be in economics. A few years ago, the Daily Beast published a list of the 15 top economics and financial journalists. It included people like the David Leonhardt, who heads up the new Upshot venture for the New York Times. He is one of the best economics writers around, but, like most of those on the list, he is a professional journalist and neither a PhD or a practicing economist. The exception on the Beast’s list is Paul Krugman, although some might consider him too partisan to qualify as a “translator.”
Gardner suggests:

Perhaps everyone could become his or her own translator, writing about their research on blogs and other social media. This proposal, however, collides with the contempt many researchers hold for social media.
David Grande and his colleagues (including the physician/writer Zach Meisel) surveyed researchers about their perceptions of social media: “Researchers described social media as being incompatible with research, of high risk professionally, of uncertain efficacy, and an unfamiliar technology that they did not know how to use.”

Our discipline does have some distinguished academic economists who blog regularly. >>>Read More

Russian Business Leaders who Joined Alexei Navalny's Anti-Corruption Drive Face Now Face Arrest

On Wednesday, the Russian news agency RIA-Novosti  announced that Konstantin Yankauskas, a this earlier post, the fight against corruption was the principal plank in Navalny’s campaign.
deputy of the Moscow city council, had been placed under house arrest. At the same time, the agency suggested that the arrests of two businessmen, Vladimir Ashurkov and Nikolai Lyaskin, were immanent. All of them are active in the anti-corruption campaign led by blogger and political activist Aleksey Navalny, and all are charged with embezzling funds from Navalny’s 2013 campaign for Mayor of Moscow—an intentionally vicious accusation, since, as I detailed in

Ashurkov’s name will be familiar to readers who remember an interview with him that I posted here two years ago. For those who came in late or have forgotten the details, Ashurkov was a star student in the American business school where I taught in Moscow in the 1990s and later earned an MBA at Wharton. After returning to Russia, his career blossomed, and he ended up as a top asset manager at Alfa Group, a Moscow investment powerhouse run by Mikhail Fridman, one of Russia’s richest men.

A few years ago, Navalny’s anti-corruption campaign caught Ashurkov’s attention. Although he had not previously been active in politics, he began to work with Navalny on corporate governance cases. His boss, Fridman, was at first OK with that, as long as it was done in his spare time. However, the political situation in Russia became more tense during Vladimir Putin’s campaign for a third term as president. As it did so, Fridman’s attitude changed. He told Ashurkov that he would either have to drop his work with Navalny or quit his job. As Fridman later explained in a radio interview,

When we parted ways, he [Ashurkov] had the right to a choice: Either not engage in politics or leave the business. He decided for himself to go the political route. . .  We live in Russia, and there is no question that in our Russian conditions, involvement in such an active political life is, as a general rule, not altogether appropriate for business.

>>>Read more

Long-term and Broad Unemployment Rates Fall to New Lows as Labor Force Expands

The Bureau of Labor Statistics reported today that the broad unemployment rate, U-6, fell to 12.2
percent in May. As the following chart shows, that was a new low for the recovery. The decrease was especially welcome because it was accompanied by an increase of 192,000 in the civilian labor force, reversing some of April’s losses. The standard unemployment rate remained at 6.3 percent in May, also a low for the recovery.

In another welcome development, the share of unemployed workers out of work for 27 weeks or more fell to 34.6 percent in May. That, too, is a low for the recovery, although long-term unemployment remains high by historical standards. The mean and median duration of unemployment also declined in May.

Involuntary part-time unemployment also fell. This group, which the BLS refers to as working part-time “for economic reasons,” include those whose employers have reduced their hours because of slack business conditions and those who can only find part-time work. The percentage of people in the labor force with involuntary part-time work resumed its downward trend in May, but has not yet reached February’s low. The number of people working part-time because that is what they prefer (“noneconomic reasons”) rose in the month. >>>Read more

Follow this link to view or download a short slideshow with additional charts of the latest employment situation