March 24, 2023

Industrial Production in the Recession of 1920-21, Compared to a Hypothetical 2022 Recession

This entry was posted on October 27, 2022 by Menzie Chinn.

Heres commercial production (Fed, Miron-Romer) index during the 1920-21 economic downturn, as reader Steven Kopits thinks this is the template for a conjectured present ongoing recession (or incipient– the conjecture continues altering).

Figure 2: Industrial production log stabilized to 1920M01= 0 (blue), and to 2021M11 (tan). Dates indicate months considering that NBER peak or assumed NBER peak. Source: Federal Reserve through FRED, NBER, and authors calculations.
To me, this suggests that the similarity here between 1920-21 and 2021-22 is not there

Figure 1: Industrial produciton from Federal Reserve (blue), and from Miron-Romer (tan), both in logs normalized to 1919M01= 0. NBER peak-to-trough economic crisis dates shaded gray. Source: Federal Reserve by means of FRED, Miron-Romer, NBER, and authors computations.
Notification that commercial production declined through the recession of 1920-21. Can we compare to the experience given that 2021M11 (peak in main GDP was 2021Q4)? Why, yes we can! Heres the development of the Fed series in both cases.

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