Is Housing The Business Cycle, 2019?

In 2007, Ed Leamer presented “Housing is the business cycle” at Jackson Hole. In 2018, Leamer himself doesn’t think a recession is imminent, but the following graph certainly gives one pause for thought.

(Click on image to enlarge)

Figure 1: Year on year growth in real residential investment (blue), and in housing starts (red), calculated as 4 quarter log differences. NBER defined recessions shaded gray. Orange denotes Trump administration. Source: BEA 2018Q3 3rd release, BuCensus/HUD, NBER, and author’s calculations.

Well, we have not broken through the 0.4 percent decline in civilian employment over six months Leamer used as a threshold, so for now (or as of November), we can rest reasonably assured that we’re not currently in a recession.

Disclosure: None.

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