Friday, September 10, 2010

US Economic Recoveries Depend on a Housing Recoveries?

Why We're in for a Long, Hard Economic Slog

Evidence from 14 U.S. recessions shows that the economy doesn't recover until housing recovers.

BY STEVEN GJERSTAD AND VERNON L. SMITH

Wall Street Journal


Our study of all the postwar recessions and the Great Depression leads to the following empirical proposition: If there is no recovery in housing expenditures, confirmed by a recovery in consumer durable goods expenditures, then there is no economic recovery.

In the Great Depression and in every recession since, recovery of residential construction has preceded recovery in every other sector, and its recovery has been far larger in percentage terms than the recovery in any other major sector.


Link: Household expenditure cycles and economic cycles, 1920 – 2010