Here are two charts of data on U.S. GDP growth rates based on government data released this week:
Consecutive quarterly declines at rate of negative 6 percent are unprecedented in modern U.S. economic history. The comparison to the early 1980s do actually show that there was a similar back-to-back decline of this magnitude exactly 27 years ago during the 4th quarter of 1981 and the 1st quarter of 1982. Jim Hamilton's analysis on this is very good, and he hints the recession seems to be moving "according to historical pattern" especially in light of the early uptick in consumption.
I believe this recession is darker than the GDP numbers suggest, and policy is the difference. The Federal Reserve was doing everything it could to cause the early 1980 recession, and it is doing everything it can to stop this one, with the same result. This observation is not a criticism of the Fed, rather a recognition of the severity of this contraction. And like Menzie Chinn, I don't feel we've felt the second wave of this downturn yet - the globalized demand shock - and the downturn in trade numbers in his words "are so large that they are difficult to reconcile with standard models." We will know a lot more for certain in 90 days, and as monthly data comes in. Buckle up, and hold your breath.
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