The mysterious recession, take II
Yesterday I claimed that the behavior of the US economy in our current recovery is, contra Matt Ygelesias, "mysterious", in that we have not seen the common "v-shape" or recovery to the original trend.
Ace commenter John Thacker pointed out that Greg Mankiw (and others) have argued that macro aggregates have a unit root and thus reversion to a fixed trend is not to be expected.
I don't want to get into a big discussion about the power of unit root tests here, so let me show a picture (from the blog Calculated Risk) that illustrates what I was trying to say (clic the pic for a more glorious image):
The graph shows job losses in the recessions since WWII. All but the last three could be reasonably described as "sort of V shaped" and except for them, time to recovery seems almost independent of the severity of the recession. Our current situation is notable both for the severity of the job losses and the extreme slowness of the job market to recover.