Secondary Sources: Recession End, Oil Prices, Muni Troubles
A roundup of economic news from around the Web.
Recession End: Harvard’s Jeff Frankel, who sits on the NBER’s recession-dating committee, says the final piece has fallen into house to call the end of the recession. “The recession is over. The last piece has fallen into house, with the BLS announcement that employment rose in March. Identifying the beginnings and ends of recessions has been hard in recent decades because the two most vital indicators, output and employment, have sometimes behaved differently from each other. Most notoriously, in the recovery that started in November 2001, employment lagged far behind economic progression. If one had gone by the labor market, one might have called it a three year recession. But if one had gone by GDP, one might have wondered whether there was a recession at all. This time around, the difficulty is not so fantastic.”
Rising Oil Price: The Economist’s Ryan Avent notices the climb in oil prices and notes the risks. “As the global economy has continued to go away from the abyss, the price of crude has climbed back to near $90 a barrel. Increases much beyond that will commence to squeeze household budgets in places solidly dependent on oil. If those increases happen slowly, then they won’t be that damaging; households will have time to adjust commutes, buy more efficient vehicles, and find other ways to substitute away from petrol. If they happen rapidly, then the result will be sufficient hurt to consumer spending to tip the American economy back toward, and perhaps into, recession. There’s really not much that can be done about this in the small term. Officials simply need to hope that households have continued to reduce their exposure to petroleum prices in the wake of the 2007-2008 spike in the cost of crude.”
Muni Troubles: Rick Bookstaber looks at where the next crisis may come from. “Well, guess where we have a market that is (1) leveraged and opaque, that is (2) very huge and tied to the credit markets; and is (3) viewed by investors as being diversifiable by holding a in nature broad-based portfolio; with (4) huge portfolios where assets and liabilities are apparently matched; and with (5) questionable analysis by rating agencies; and where (6) there are many entities, entities that may not approach default with business-like dispatch, and that have already mortgaged sources of revenue that are thought to support their liabilities? Answer: The municipal market.”
Compiled by Phil Izzo