Checking in on Financial Crises Recoveries
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Transcript of Checking in on Financial Crises Recoveries
Checking in on Financial Crises Recoveries
FTA 2012
Josh Lehner, Oregon Office of Economic Analysis
The views expressed here are not necessarily those of the Office of Economic Analysis or the State of Oregon
Peak
1 2 3 4 5 6 7-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
U.S. Recession Employment Loss
1948 1953 1957 1960
1969 1973 1980 1981
1990 2001 2007
No. of Years from NBER Peak
% f
rom
NB
ER
Pe
ak
Great Recession / Little Depression
Data through August, 20122
• Financial Crises Precursors:– Markedly rising asset
prices– Slowing real economic
activity– Large current account
deficits– Sustained debt buildup
• Public or private
3
Main Findings
Financial Crises FactsU.S. Avg
(‘81, ‘90, ‘01)Historical Average
Real Housing Prices -5.7% -35.5%
Real Equity Prices -29.5% -55.9%
Unemployment Rate +3.2% +7.0%
Real GDP per Capita -2.3% -9.3%
Real Government Debt 27.5% 86.0%
Current U.S. Cycle
-42.4%
-53.4%
+5.7%
-6.4%
78.0%
4
6.0
Note: While the financial crisis began in 2007, the S&P Case-Shiller peaked in mid-2006 and the calculation used here is based on this peak. The real homeprice trough was reached in February 2012. Sources: S&P/Case-Shiller Home Price Indices, BLS
42.4%
US, 2007
Note: To obtain inflation adjusted debt for a full three years the calculation dates chosen here are July 2008 – July 2011. Depending upon which dates one prefers, the percentage increase varies, e.g. Dec 2007 – Dec 2010 the increase is 73 percent.Source: BLS, U.S. Treasury – Debt Held by the Public
78.0%
Employment Losses
• Given the history of post WWII recessions in the US, the current level of job loss and slow recovery to date make the current cycle the clear outlier
• Juxtapose the current US cycle against the Big 5 financial crisis in the developed world plus the Great Depression and the picture looks a bit different
• That doesn’t necessarily mean the current outcome is acceptable
7
Peak 2 Years 4 Years 6 Years 8 Years 10 Years 12 Years 14 Years 16 Years 18 Years
-20%
-16%
-12%
-8%
-4%
0%
4%
Financial Crisis Employment Loss
Spain 1977 (13.0 Years) Norway 1987 (8.5 Years) Finland 1991 (17.3 Years) Sweden 1991 (17.8 Years) Japan 1992 (NA) U.S. 2007 (?)
Per
cen
t Jo
b L
oss
Fro
m P
eak
But We’ve Done Something Right
Note: Return to peak duration given in parenthesis. Japan’s employment essentially reached a plateau in 1992, the start date used here is 1992 Q1. Sources: OECD, BLS
More Context for Losses
-10
Years
-9 Y
ears
-8 Y
ears
-7 Y
ears
-6 Y
ears
-5 Y
ears
-4 Y
ears
-3 Y
ears
-2 Y
ears
-1 Y
ear
Peak
1 Yea
r
2 Yea
rs
3 Yea
rs
4 Yea
rs
5 Yea
rs
6 Yea
rs
7 Yea
rs
8 Yea
rs
9 Yea
rs
10 Y
ears
80
85
90
95
100
105
110
Financial Crises Employment, Peak = 100
Finland
Japan
Norway
Spain
Sweden
U.S
9
What Exactly is Different This Time?
• “We have put a much higher floor on the initial contraction.”
- Carmen Reinhart via Ezra Klein, Oct 15th 2012
• Monetary and Fiscal Policy– Coordinated, global response
10
Monetary Policy
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-120
1
2
3
4
5
6
7
8
Central Bank Interest Rates
G7 Average
China
U.S. (FED)
EU (ECB)
11
Monetary Policy (Cont)
Source: Federal Reserve Bank of Atlanta
Monetary Policy (Cont)
Source: Federal Reserve Bank of Atlanta
Fiscal Policy
Austra
liaBra
zil
Canad
aChin
a
Franc
e
Germ
any
Italy
Japa
n
Korea
Mex
icoSpa
inU.K
.U.S
.0%
1%
2%
3%
4%
5%
6%
7%
Economic Stimulus as Share of 2008 GDP
Spending in 2010+
Spending in 2009
Source: Brookings, March 2009 based on IMF and Brookings’ author’s calculations 14
Conclusion
• The U.S. is experiencing your “garden-variety severe financial crisis.”
• However labor markets are performing better than previous episodes.
• Recovery path has been slow and steady.
15
16
Contact Information
Standard Contact:
(503) 378-4052
www.oregon.gov/das/oea
Social Media:
oregoneconomicanalysis.wordpress.com
@OR_EconAnalysis