Weekly Market Insight
| The Shape of Recoveries | |
| As the recession ebbs, discussion has turned to the shape of the coming recovery, with letters of the alphabet being the most popular descriptors. Most recovery cycles prior to the 1980s assumed the shape of a “V,” meaning that both GDP and employment bounced back quickly after the economy hit bottom. In the early 1980s, there were back-to-back recessions, the second of which was triggered when Paul Volcker, chairman of the Federal Reserve, raised interest rates sharply to choke off inflation – successfully, as it turned out. The labor market profile during this period assumed the shape of a “W.” The 1990-91 and 2001 recessions, though short and shallow, were followed by jobless recoveries, meaning that GDP was expanding but not fast enough to encourage employers to hire. Thus, payroll employment languished at the bottom for a number of months after those two recessions ended, creating a recovery in the shape of a “U” or an “L,” with the distinguishing feature being the length of time before the labor market began to grow again. These descriptions are loose and somewhat subjective, but they mirror how the terms are being used in media reports on the economy. Source: U.S. Bureau of Labor Statistics, Grubb & Ellis Bob Bach is our Senior Vice President, Chief Economist | |