Listening to the news this morning, I heard several commentators note that things were bad for the Republicans, despite the economy being in good shape and unemployment very low. I won't repeat here all the evidence that the economy is not in great shape for middle- and lower-income Americans--that's it's being buoyed by record levels of debt, a frothy housing market, and Gilded Age tax policies for the wealthy. (Though if you'd like to read some of that, you might start here or here.) But I did want to highlight a chart from a recent post at Calculated Risk and its demonstration that low unemployment figures usually precede recessions:
They're not predictive indicators, as the post makes clear, merely coincident. But it's a striking chart, nonetheless, and certainly puts all the shouting about low unemployment in a different light.
In fact, as economists and Wall Street types have historically been very bad at predicting recessions, it is possible that we are in a recession already. Last quarter's GDP growth officially was an anemic 1.6%, but probably closer to 0%. If Q4 is as poor, and Q3 revised downward--ta-da! A recession.
Update: Finally found a couple things I wanted to include in the post earlier. First is a link to September 8, 2006 post by Nouriel Roubini, in which he notes that "in March 2001 in a survey 95% of US economic forecasters predicted that there would not be a recession in 2001; 95% of them! Too bad that the recession had already started exactly in March of that year!" Second is an April, 2000 paper (PDF) by Prakash Loungani of the IMF, which Dr. Roubini cites, that looked at economists' predictions of GDP growth from 1989 to 1998. It concludes that "the record of failure to predict recessions is virtually unblemished."