ymarkov | The Recession May Be Over...

Global Economy Gains Steam

Jobs Still a Worry, but Factory Output Rises in U.S., China, France; Markets Falter

Manufacturing gains in the U.S., Europe and Asia added to evidence the global economy is improving at a faster pace than was widely anticipated a few months ago. For the first time since January 2008, an index based on a survey of U.S. manufacturing purchasing managers crossed a threshold indicating factory output grew. Manufacturing activity in China, France and Australia, among other countries, also expanded in August, separate surveys showed. The pace of contraction in Germany and some other nations slowed markedly.

Stocks pulled back Tuesday, but financial markets in much of the world have been rallying in recent months. Businesses and households have been regaining confidence, and economists have revised forecasts upward.

U.S. auto sales were the best in over a year, and the National Association of Realtors index of pending home sales hit its highest level in over two years. "We had been looking for improvement, but the speed at which it's come and the magnitude with which it has come is surprising," said J.P. Morgan economist Bruce Kasman. "We all went down hard and we're all going up pretty well."

...and it wasn't anything like the Great Depression, more like the 1970s slump:

What Happened to the 'Depression'?

Despite the rhetoric from Washington, we were never close to 25% unemployment.

By ALLAN H. MELTZER

Day after day, economists, politicians and journalists repeat the trope that the current recession is the worst since the Great Depression. Repetition may reinforce belief, but the comparison is greatly overstated and highly misleading. Anyone who knows even a bit about the Great Depression knows that this is false.

The facts we face today are very different than the grim reality Americans confronted between 1929 and 1932. True, this recession is not over. But it would have to get improbably worse before it came close to the 42-month duration of the Great Depression, or the 25% unemployment rate in 1932. Then, the only safety net was the soup line.

The current recession is also much less severe than the 1937-38 Depression. A more accurate comparison is to the 1973-75 recession. Today's recession is as deep and most likely won't be much longer than the one we experienced some three decades ago. By pointing this out, I do not intend to minimize the damage that the economic crisis has had on individuals and businesses. But as policy makers make decisions in order to alleviate the recession, they are not helped when economists overstate its severity.