“Jobless Recoveries” and Real GDP During the First Four Quarters of an Economic Recovery
Real gross domestic product (GDP) is nearly certain to post an increase starting in the third quarter of 2009. Although each economic recession and recovery is different, it is nonetheless instructive to track the trail of economic history. The economic expansions which began in March 1991 and November of 2001 have been coined as “jobless recoveries” and it is entirely conceivable that the current recovery will join this humble group. The median and average growth rates of real GDP during each of the first four quarters after the onset of a recovery are listed in table 1 excluding the 1991 and 2001 expansions. Two important conclusions emerge from table 1: (1). Real GDP has posted a decline in the first quarter of an economic recovery in a few business cycles. (2). The median and average growth of real GDP in the second, third, and fourth quarters following the trough is stellar in all post-war economic recoveries excluding the 1991 and 2001 business expansions. Consistent with the moniker of jobless recoveries, the 1991 and 2001 recoveries are marked with significantly tepid growth in the first four quarters after the trough (see table 1). Based on history, the current projected jobless recovery could be a period of lackluster growth. The challenging credit market situation raises the probability of this forecast being accurate. The economic bulls may have to reconsider their forecasts.
Mortgage Purchases Index Posts Significant Jump
The Mortgage Purchase Index of the Mortgage Bankers Association rose 9.6% to 304.1 during the week ended September 4, the highest since early 2009. The attractive mortgage rate environment and the $8000 home buyer credit programs are factors helping to raise purchases of homes.
The drop in mortgage rates also led to a 22.5% increase of the Mortgage Refinance Index. These numbers change the hue of the housing market somewhat.
