A smidgen of optimism (blog by Krugman)

[dtotire]

We won’t be getting a 3rd-quarter GDP estimate until October 29, but we do have industrial production — and it’s growing seriously fast: 5.2% annual rate for 3rd quarter, even faster in the last month.

I know that various outfits make a business out of producing advance estimates of GDP using a variety of measures, but I thought I’d just look at the historical relationship between industrial production and GDP growth (data since 1995):



Those big negatives on the lower left are the recent recession, with industrial production dragged down by massive inventory liquidation. Some of what we’re seeing now is just payback for that, and not an indication of broader growth. But even so, recent industrial growth suggests GDP growth of 4 percent or more.

If that’s right, and it continues, we should be seeing some job gains soon; the negative miracle of rapid growth without jobs can’t continue indefinitely.

So we may see some light in the near future.

On the other hand, it would take two years of 5% growth just to get unemployment back to around 7%. So we’re a long way from being out of the woods, or even to the point where the Fed should lift rates above zero.

So not too much optimism — but the picture isn’t entirely black.



http://krugman.blogs.nytimes.com/2009/10/16/a-smidgen-of-optimism/

[Demeter]

1. We'll See

We've been lied to with statistics before.