The Little Man Who Wasn’t There

Yesterday, upon the stair,
I met a man who wasn’t there
He wasn’t there again today
I wish, I wish he’d go away…

From Antigonish by Hughes Mearns (1899)

Scott Sumner has a divergent explanation for the “jobless recovery”—there isn’t a recovery at all:

Where’s the evidence of a recent trend toward jobless recoveries? What I see isn’t jobless recoveries, but three consecutive recessions where the first 6 quarters saw no recovery at all (relative to trend.) We fell into three deep holes, and started digging sideways.

So yes, the last three recessions have been quite different, but the difference was that during the first 6 quarters of “recovery” there was no recovery at all. And 1983 is not an outlier. We can’t do 1980, because the entire recovery lasted much less than 6 quarters, but previous postwar recessions saw RGDP rise at 5% to 10% rates during the first 6 quarters of recovery.

The real question is why did RGDP rise so slowly during the three most recent recoveries. If you haven’t guessed yet, you’re obviously new to my blog.

There’s no jobless recovery, there’s a jobless lack of recovery, or more accurately a M*V-less lack of recovery.

He continues on for several paragraphs and then closes with something to contemplate:

Perhaps inflation targeting (rather than level targeting) also plays a role. Price level targeting leads to V-shaped recoveries and inflation targeting leads to L-shaped “recoveries.”

6 comments… add one
  • steve Link

    I think Sumner ignores the unique qualities of some of those recoveries. The 1982 recovery was accompanied (caused ?) by a drop from very high interest rates. Still, I keep reading the guy and thinking he may be right. The obsession with inflation seems misplaced right now.


  • As I’ve written before, I’m not particularly concerned about inflation. I’m very concerned about hyperinflation. I’m further concerned that economists don’t seem to recognize that hyperinflation isn’t a phenomenon that takes place on a spectrum from low (or no) inflation through moderate inflation and high inflation to hyperinflation. I read yet another blog post from an economist today that had the underlying assumption that hyperinflation was on such a spectrum.

  • john personna Link

    Marginal Revolution has some posts today about technology and job replacement. Probably not totally unrelated.

  • Drew Link

    I have to confess that I don’t know this Sumner guy. But I thought he was light (as I back read a number of his posts) on inflation. “Its all expectations etc……What?

    And the price level vs inflation thingy was just weird.

    Yet he apparently recognizes velocity. And that’s the Big Deal. What if it takes off? Dave remarks….”worried about hyper vs inflation.” Exactly. Hyper would be a mess, and catastrophic. Slight inflation could be part of a viable 4-5 variable policy mix.

    Separately, I note that a number of left oriented commentors had adopted a “I dare the Republicans to propose spending cuts” mantra………thinking they wouldn’t. Now we have the bluff called, with Dems unwilling to cut squat. Anyone surprised??

  • john personna Link

    Drew, aren’t they all just trading sound bites?

    I commented in support of Boehner at OTB, but I think the cup is a long way from the lip.

  • Drew Link

    “Drew, aren’t they all just trading sound bites?”

    I think that’s overstated. I understand, none of them are proposing revisions large enough to suit me, and perhaps not large enough for you either. But if we don’t get started in a) halting the spending momentum and b) actully cutting or reducing spending growth rate trajectories we shall most assuredly drown in debt, or inflate it away.

    BTW – I met with my portfolio manager / private banker last week. They are really getting serious about introducing inflation and currency hedges into the portfolio. And JP Morgan’s CE is warning of a huge bond price hit. Things rarely happen overnight, but storm clouds are forming.

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