By historical standards, the current recovery from the recession that began in 2007 has been disappointing. As John Taylor of Stanford University’s Hoover Institution and the Department of Economics argues in Part 1 of this discussion on the economy, GDP has not returned to trend, the percent of the population that is working is flat rather than rising, and growth rates are below their usual levels after such a deep slump.
In this episode, Taylor and Number’s Game host Russ Roberts discuss possible explanations for the sluggish recovery: the ongoing slump in construction employment, the effect of housing prices on saving and spending decisions by households, and this recovery’s having been preceded by a financial crisis. Taylor rejects these arguments, arguing instead that the sluggish recovery can be explained by poor economic policy decisions made by the Bush and the Obama administrations.
1) On the argument that there are structural problems in the labor market (0:25)
2) Comparisons to the 1981 recession (2:16)
3) Is this recession special because it followed a financial crisis? (2:46)
4) What can the Great Depression tell us? (3:55)
5) Why is the current recovery so mediocre? (5:32)
LINKS TO DATA & PAPERS REFERENCED -
1. Construction Sector Employment Chart:
Bureau of Labor Statistics- Series CES2000000001, Seasonally Adjusted
2. S&P/Case-Shiller Home Price Indices Chart:
S&P Dow Jones Indices and Fiserv 9-25-12 -http://www.standardandpoors.com
3. Personal Saving as a % of Disposable Income Chart:
BEA NIPA Table 2.1 line 36
4. 2008-09 and 1981-1982 Recession & Recovery Charts:
Real GDP (GDPC1) downloaded from FRED 7/13/12, taken from BEA.gov -http://research.stlouisfed.org/fred2/series/GDPC1/
Potential GDP (GDPPOT) downloaded from FRED 7/13/12, taken from CBO.gov - http://research.stlouisfed.org/fred2/series/GDPPOT/
5. ‘Deep Recessions, Fast Recoveries, and Financial Crises: Evidence from the American Record’ by Michael D. Bordo and Joseph G. Haubrich -http://media.hoover.org/sites/default/files/documents/Bordo-Haubrich-Steep-Pa…
6. 1893-94 and 1907-08 Recession & Recovery Charts:
GDP data from NBER, compiled by Nathan Balke and Robert Gordon with adjustments by John Taylor for comparability with earlier charts -http://www.nber.org/data/abc/. Potential GDP calculations by John Taylor using a Hodrick-Prescott trend.
7. 1933-36 Great Depression & Recovery Chart:
GDP data from NBER, compiled originally by Nathan Balke and Robert Gordon - http://www.nber.org/data/abc/.
8. 1929-1940 Unemployment Rate (% of Labor Force) Chart:
Historical Statistics of the United States (Millennial Edition) – Table Ba470-477: Labor Force, Employment, and Unemployment, 1890-1990 -http://hsus.cambridge.org/HSUSWeb/toc/showTable.do?id=Ba340-651
9. ‘An Empirical Analysis of the Revival of Fiscal Activism in the 2000s’ by John B. Taylor -http://www.stanford.edu/~johntayl/JEL_Taylor_Final%20Pages.pdf
Click the following link to view “The Economic Recovery (Part 1)”