Chart of the Day: How Deep Was Your Recession?
When I ask how deep was your recession, I don’t mean that personally. I mean to ask how deep the downturn in your country was. On Tuesday, Martin Wolf had a good graphic on this:
Of the six biggest advanced economies – the US, Japan, Germany, France, the UK and Italy – only the US and Germany had higher gross domestic product in the first quarter of 2011 than three years before and then only by a little. I regard the four laggards as being still in recession.
The fact that the US had the highest GDP, relative to its starting point, of these six countries may be a surprise to some, given its 9 per cent unemployment rate in April. That reveals the flexibility of the US labour market. It also suggests that demand and so output remain depressed. By the standards not of other rich countries today, but of its own past, the US recovery is extremely disappointing (See charts).
My view is a bit different. I don’t think the GDP uptick comparison reveals the flexibility of the US labour market at all. As Wolf says, the US has over 9% unemployment. It also has 16% underemployment. That contrasts negatively to Germany, for example, where not only is overall unemployment 7.0%, but also the eastern States are still working their way out of a long bout of high unemployment. In the east, unemployment is still 11.3%. Unemployment in the western German states is 6.0%.
Wolf is right that output remains depressed in the advanced economies. Germany is the only country besides the US that has already attained pre-recession output levels. But Germany is very export-dependent. This has meant an exaggerated decline during the downturn and an exaggerated rebound during recovery. The New York Times’ David “Leonhardt points to a few things aiding recovery: exports, the lack of a housing bubble, and fiscal stabilisers.” Those are the same factors I see.
Before the earthquake and tsunami caused a double dip, you saw the same forces at work in Japan, which is arguably even more export-dependent. This past month’s German manufacturing and trade data were weak. This is only one month’s data. However, my expectation is that it will be seen as a harbinger of the downward pull that a global growth slowdown is having on the German economy. As German exports are now increasingly geared to emerging markets, continued growth there will attenuate the effect of a European and North American slowdown. But growth should slow in emerging markets too and that means a weaker second half for Germany.