- by New Deal democrat
No significant economic news today, so let’s take the proverbial “35,000 foot” look at the US economy in the past two years.
One of the things I have gone back and forth on over that time is whether there was a “mini-recession” late last year. As of the lastest revised data, I believe there was, from a peak in July through the end of the government shutdown in November.
Here’s a look at four important data series the NBER uses to date recessions: employment (blue), industrial production (red), real total sales (gold), and real income less government transfers payments (purple) for the past two years:
Two of the series, production and sales, hit interim peaks in July. The other two, employment and income, made peaks in September only slightly higher than their interim peaks in July. [Note, by the way, that I’ve had to amplify the volatility in employment *2 simply so that it doesn’t appear as a squiggle]. The average decline in the four series through the end of November was about -0.5%.
I haven’t included real GDP in the graph, partly because the NBER doesn’t particularly give it importance, and partly because real GDP can and has in the past - notably in 2001 - risen between the beginning and the end of recessions.
Last summer and autumn were only a “mini-recession” in part because the downturn only lasted 4 months, and partly because the -0.5% average decline was not sharp enough to qualify. By contrast, here are the same metrics for the shallow 2001 recession:
From peak to trough, in 2001 all four metrics declined at least -1.0%, and three of them by at least -1.5%.
Aside from not being deep or long enough, fundamentally why didn’t the mini-recession of 2025 manifest as a full-blown consumer-led downturn, despite real income declining more than -1.0% through April of this year? In addition to real total sales and industrial production trending higher by over 1% so far this year, the below graph tells the tale:
If real income has been down over -1%, and real aggregate payrolls only up 0.7%, stock market wealth has increased almost 25% since July of last year.
This is the “K-shaped” economy. In addition to the inflationary tax cuts in last autumn’s Big Bad Bust-out Budget Bill, this 25% increase in stock market wealth has been driving a splurge in spending, the austerity being visited on those without stock market holdings be damned.
In conclusion, an important caution: these are coincident indicators; i.e., this is a nowcast, and should not be projected forward. Aside from a further geopolitical shock, per my commentary earlier this week, I would be looking for a downturn in corporate profits, and a downturn in real sales per capita, plus a continued stall in real aggregate payrolls, before I would change my current short term forecast. In other words, the above describes an inflationary expansion.
