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Green Shoots of Recovery or Just More Weeds?

Whether it's the arrival of spring or people growing tired of all the bad economic news, everyone seems to be getting out their microscopes and scrutinizing every single data release all in the hopes of spotting the end of the recession - hence all the talk of green shoots. A point I've made in previous posts is that isolating one-time moves of a single (or even a few) data series is futile; first, subsequent revisions can wipe away any perceived progress, but second, and more importantly, the old adage of "one month (or quarter) does not a trend make" applies to when you're talking about something as big and dynamic as the U.S. economy.

However, some key indicators might provide a guideline as to when the economy might begin to improve. For example, James Hamilton of Econbrowser illustrates a nifty historic connection between the 4-week moving average (MA) for initial unemployment insurance claims and the end of recessions. Over the past three weeks, the 4-week MA for initial claims has declined 3.3 percent; that's not a huge improvement, but it is still progress. Unfortunately, the good professor shows this corresponds to only a 50/50 chance of economic recovery by summer. So, it looks like we'll need more evidence before we can strike up the parade.


Posted 05-01-2009 3:20 PM by Brian Lego
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Comments

Leslie | JRS Medical wrote re: Green Shoots of Recovery or Just More Weeds?
on 05-02-2009 5:20 PM

Thank you for putting some intelligence into this debate based with statistics that the economy is not out of trouble yet.  Of course if you are selling blue surgical masks at least the swine flu assisted in your sales.  Thank Brian, keep up the good posts.

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