12 years ago, a prophet wrote:
I believe WTI oil prices are actually at post-crash highs based on the 9.4% unemployment report.
I think the economic news shows that we are bucking the trend.
This is good news and bad news. The good news: an unexpectedly sharp recovery. Bad news: Our analysis suggests the U.S. slips back into recession with oil above $80, and I think we’ll have a chance to test this hypothesis relatively quickly.
Here is a picture of US GDP (relative to potential GDP) and oil prices (WTI). I don’t see a “V” nor a recession, despite oil above $80/bbl.
figure 1: GDP in billions Ch.2012$, SAAR (black, left log scale), potential GDP (grey, left log scale), oil prices, WTI, $/bbl (red, right log scale). NBER defines recession dates, peaks and valleys, shades of gray. The turquoise arrow predicted by Mr. Kopits. Sources: BEA, CBO (July 2021), EIA and NBER.
To avoid controversy over whether the recovery from the Great Depression is a “V”, I provide a comparison between the current and last recovery (personally, the current recovery is more “aggressive” than a “V”, but you get the idea).
figure 2: GDP for Q2 2020 (blue) and Q2 2009 (brown), in billion Ch2012 dollars, normalized to log trough. The red dotted line at the trough. Source: BEA, NBER and author’s calculations.
So when you hear many clear predictions, consider the source when considering their plausibility.
