14 JUN 2009, Sunday

1. Starting from a business cycle peak of December 2007, the graphic above is an effort to normalize and rescale the economic data by assigning an index value of 100 to December 2007 numbers for each of the four statistics, so that comparative changes are easier to evaluate. Note that for each series, the average, high and low values are plotted for each month following the prior business cycle high. For industrial production, employment, and real retail sales, the average series includes the 10 recessions starting with the November 1948 business cycle peak. For real income, the average starts with the April 1960 peak.
   In terms of conclusions, the current recession is establishing new lows for industrial production, employment and retail sales. Curiously, real income, while low, is not even approaching record lows. Note also that in prior recessions, employment and retail sales have usually started to rebound by now, with real income and industrial production taking longer to bottom.
   Going forward, it will be interesting to see how long some of these indicators continue to set record lows and how long before they rebound to the levels of the “average recession".