There are positive signs out there for those looking for them. The latest results from the Wall Street Journal’s survey of economists indicate expectations of an end to economic contraction in September. That’s a bottom, keep in mind, which means that we’d still be months or years away from returning to trend output levels, months away from a decline in unemployment, and years away from full employment.
Meanwhile, James Hamilton looks at historical data on weekly jobless claims and notes that if we have actually hit a plateau for new claims, then an end to economic contraction could arrive within weeks. But again, that’s a plateau at around 650,000 lost jobs a week. Decline from that level still means that you’ve got hundreds of thousands of new claims each week for some time to come.
But growth is growth, and would mark a signfiicant turning point. It would allow leaders to say that the economy is growing again, that the end of the pain is within sight, and that things will be fine if we simply stay the course. And considering the size of the initial shock to the economy, escaping with a two-year recession would be a huge relief and a major ratification of countercyclical policy.
I think it’s important to consider our likely position within the recession when thinking about policy dynamics. There are some who feel this early optimism is unwarranted and will derail necessary policies — a second stimulus, say, and a major reorganization of the banking system. There are others who may be agnostic on the optimism, but who see it as eroding the will to make big changes to national policy. On the other side, some see the optimism and are hesitant to touch anything for fear of undoing current progress; sure more drastic measures may be necessary for some banks, but if those measures set back recovery or are perceived to set back recovery, then the political cost would be too high to tolerate. And others are going to be cheerleading recovery (as they’ve been downplaying the severity of the recession) to try and undermine the case for major policy reforms.
Everyone wants the recession to end, but everyone wants the world to look a certain way when it does. To a certain extent, how people view the recent green shoots will depend upon what they think needs or doesn’t need to be done to change the system.