Wednesday, August 26, 2015

How’s This Expansion Doing?

I pulled an interesting graphic from an article about the weakness of the current expansion.


There’s a lot here, and not all of it is good (plus, no graphic designer would ever encourage using the vibrant colors). The colors are there to help the viewer keep track of years by going in a ROY G. BIV ordering, except with darker and lighter gray substituted for the R and the O, and with them totally ignoring indigo because … well … everyone else does, or something like that.

Anyway, what I really liked was the panel at the bottom left. This shows the cumulative real GDP growth after each trough since the late 1940’s.

One note of caution: the white area at the right of some of the bars shows all the growth for years past the 6th one. So, there’s only three expansions that went that long, but for each of them there was still significant growth … and under Clinton it was almost half of the growth from the expansion.

What’s the takeaway from that panel? First off, the partial rainbow of colors shows that this expansion is already longer than most of them. Second, the cumulative growth in this expansion is particularly weak: the expansions that weren’t as strong as this one were weak because they were already done by this point. Third, there really isn’t a sense that this expansion is weak because it was weak at one particular point. It’s been weak throughout.

And that’s an important point. I tend to be an apologist for the Obama record. It’s not great, but it’s on the low end of normal, and good enough to stay let’s wait and see. But a graph like this emphasizes my feeling that the longer we go with that story, the harder it becomes to rationalize. The pervasive weakness with each passing year suggests that there’s something holding the economy back over the medium term that just isn’t going away, and wasn’t there before Obama came along.

This is drawn from an article entitled “Economy Picks Up But Stays In It’s Rut” which appeared in the July 31 issue of The Wall Street Journal. The charts came from a companion piece entitled “Six Year Checkup”.

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