Sunday, January 16, 2011

Is it all better?

I've seen the graph below many times. It looks like the "great recession" took a significant cut out of the economy, but it also looks like we've recovered. Have we? Of course not; we still have over 9% unemployment. It looks like we won't get back to a normal level of employment for a number of years.

Look at this graph—my first attempt to use FRED. It shows that employment is below its level at the start of this century whereas corporate profits and GDP are way above. The green line in the middle represents the total US population. The orange is corporate profits. All lines are scaled to an index that starts at 100 on Jan 1, 2000.

This next graph substitutes the S&P500 for the population. (Apparently FRED is limited to 4 lines at a time.)
I'm surprised to see how corporate quarterly profits lead the stock market. I thought it was supposed to be the other way around!

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