The Anemic Recovery from Great Recession Surprise Economists

The Anemic Recovery from Great Recession Surprise Economists

The Anemic Recovery from Great Recession Surprise Economists


Friday, the Federal Reserve Chairwoman Janet Yellen said that the slow recovery from the Great Recession has surprised economists, confounding long-held beliefs about growth and inflation.

Speaking to an economic conference at the Federal Reserve Bank of Boston,  Ms. Yellen did not address the Fed’s timetable for rate hikes.

The central bank is widely expected to resume raising rates in December, a reflection of an improved economy, but do not count on it.

Early this year the Fed projected 4 additional hikes, none happened.

Ms. Yellen said sluggish worldwide growth will keep global interest rates low, making it harder for central banks to combat the next recession with rate cuts.

In the aftermath of the Great Recession, Ms. Yellen noted that economists are baffled by the economy’s refusal to comply with their expectations, during the Great Depression of the 1930’s, for example, and the “stagflation” of the 1970’s when high unemployment co-existed with high inflation.

The aftermath of the Y’s 2007-2009 crisis has “revealed limits in economists’ understanding of the economy,” she suggested. Tumbling home prices reduced consumers’ willingness to spend more than economists had envisioned. And a steady decline in the unemployment rate has failed to lift wages and inflation as much as economic models would indicate.

Ms. Yellen said the sluggish recovery suggests that “it is even more important for policymakers to act quickly and aggressively in response to a recession” and that policymakers might need to provide more stimulus “during recoveries than would be called for under the traditional view.”

In December, the Fed raised short short-term U.S. rates from near Zero, where it had kept them for 7 years. Fed policymakers had been widely expected to raise rates 4 times this year, but they have not, citing persistent uncertainty about the economic outlook.

Friday, the US major stock market indexes finished at: DJIA +39.44 at 18138.38, NAS Comp +0.83 at 5214.16, S&P 500 +0.43 at 2132.98

Volume: Trade was below average with 785-M/shares exchanged on the NYSE.

  • Russell 2000 +7.2% YTD
  • S&P 500 +4.3% YTD
  • NAS Comp +4.1% YTD
  • DJIA +3.9% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Bearish (-0.28) Bearish (-0.27) Bearish (-0.42) Neutral (-0.14)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Neutral (-0.19) Neutral (-0.14) Bearish (-0.29) Neutral (-0.14)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Neutral (0.18) Neutral (0.05) Neutral (0.12) Bullish (0.38)
HeffX-LTM Analysis for VXX: Overall Short Intermediate Long
Neutral (-0.06) Neutral (0.03) Neutral (0.08) Bearish (-0.29)

Have a terrific weekend

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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