Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Wednesday, September 20, 2006

The Housing Slide Is Here. Can Recession Be Far Behind?

Jim Hamilton creeps toward the position that there will be a recession:

Econbrowser: Watching housing slide: The Census Bureau yesterday released August data for housing permits and new housing starts, both of which confirm that we are in the midst of a significant housing downturn. Permits for new construction fell 2.4% (logarithmically, seasonally adjusted) at a monthly rate during August, which puts them 24.7% (logarithmically) lower than August 2005. Housing starts were down 6.2% for the month and 22.0% for the year.

The 2006 decline is already substantially worse than what we saw in either the 2001 recession or the 1994 "soft landing."... It is hard to find an example of a decline of this magnitude that wasn't associated with a recession.... For a really convincing example of declines of this year's magnitude that did not produce a recession, I think you have to go back 40 years to 1966-67. That also turns out to be how far back you have to go in order to find a negative yield spread (as measured by the 10-year minus 3-month Treasury rate) that wasn't followed by recession....

My main question is how long it will take the same people who were sniping at Bernanke for not tightening enough now to start hollering that he went too far.

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