Economics & Research Blog
Now All Economic Data Will Be Suspect for a While
The release of a positive Leading Economic Indicators report yesterday was a reminder that no matter what the economic news might be,
By Dr. Joe Webb
Published: August 21, 2007
The release of a positive Leading Economic Indicators report yesterday was a reminder that no matter what the economic news might be, someone will say "that was before the subprime crisis hit." This will supposedly render any economic data coming out for the next few weeks to be useless.
But they are economic data nonetheless. No one can say right now that the subprime effect will be deep or long except for those involved, much like the financial business getting the flu, and everyone else getting a mild cold. We need the economic data and the economic data are just as important as they are any other time.
After all, you don't have a recession without a decline from somewhere, nor do you have an upturn without an increase from a lower level. These data also allow us to assess how strong non-financial sectors were going into the subprime chaos, and also allow us to see what things are like coming out of it. It would be quite different if the leading indicators showed a decline prior to this latest mess, and the prescription to fix it or adjust to it would be quite different as well.
During the last recession, things weren't that bad compared to prior recessions. Part of that was the Fed flooding markets with liquidity, especially after 9/11/2001. Double-digit unemployment and steep negative growth rates were nowhere to be seen. The sluggishness of the end of 2000 to the end of 2002 period was just that, probably a recession that was not allowed to happen. No one pats anyone on the back for jobs not lost, or declines avoided.
A recession is not going to happen now, either. We've been forecasting sluggish, below average growth for quite a while, and that's exactly what we're going to get. In the meantime, enjoy the bargains that retailers will be throwing our way this coming holiday shopping season. And get ready for an incredible amount of negative economic news, lacking any kind of historical context, and the whining that those reports don't really matter anyway, when they really do.