The January economic data is starting to trickle in, and so far the signals are encouraging. Well, mostly encouraging. There’s a question about the year-over-year change in unadjusted jobless claims, which are posting an increase for the second week in a row. But the seasonally adjusted numbers are still trending positive, and so the warning in the raw data may be a statistical quirk rather than a genuine warning. Supporting the case for optimism for the first month of the new year so far is today’s strong gain in the Markit US Manufacturing Purchasing Managers Index (PMI) for January.
Daily Archives: January 24, 2013
Debt & The Business Cycle: A Useful But Incomplete Explanation
Steve Clemons and Richard Vague tell us that it’s all, or at least mostly, about debt. The financial crisis and the Great Recession were “caused primarily by a massive private debt buildup,” they write in a recent white paper: “How To Predict The Next Financial Crisis.” The authors will be speaking next month at a conference on the topic at the Global Interdependence Center in Philadelphia and presumably they’ll lay out the evidence in some detail. They’re certainly on solid ground when they link debt with financial crises. History is quite clear on this point. But let’s be careful here. Citing debt as the main catalyst that routinely triggers recessions across time is surely going too far.