Latest Downturn Research Articles

In recovery mode: manufacturers try to bounce back after COVID-19 disruptions.

Manufacturers experienced significant disruptions in their operations and demand in 2020, as businesses struggled to cope with COVID-19 and its implications. To control the spread of the virus, governments initiated stay-at-home orders, and many firms were forced to close or limit operations. As a result, there were severe declines in production and employment, both in the United States and in global markets, often at record paces or rivaling the decreases seen in the Great Recession. While activity has started to rebound somewhat in this latest downturn, it will take time for output and hiring to return to pre-recessionary levels—perhaps not until at least 2022—with uncertainties in the outlook pervasive.

Contagion versus Interdependence Across Regional U.S. Housing Markets and Implications for RMBS Geographic Diversification Strategy

Executive Summary Home prices in the United States often exhibit little (and sometimes even negative) correlation across different regions. This reflects segmentation in the national housing market and also provides an apparent opportunity for investors to diversify their exposure to regional downturns by creating residential mortgage-backed securities (RMBSs) out of geographically dispersed home loans. Unfortunately, in a crisis, correlations may rise, and the benefits from geographical diversification may disappear just when investors most desire them. Using a flexible generalized autoregressive conditional heteroscedasticity (GARCH) technique, I find that regional correlations indeed rose dramatically during the latest downturn, in some cases to unprecedented levels. Moreover, this increase in co-movement was clearly financial contagion, and not merely interdependence. Investors in mortgage-backed and other housing securities should thus not rely on house price correlations calculated during “normal” t...

Why we aren't predicting a global recession

▀ Fears that the global economy is heading into a recession are rising. But while we cannot ignore the risks that a recession could be brewing, our baseline assumption is still for a modest growth slowdown from here. ▀ The global economy is in a similar position to 2012 and 2015, as mounting uncertainties dampen growth. This time, trade tensions are a high‐profile culprit rather than the possible collapse of the eurozone or a China hard landing. ▀ In the previous two cases global growth fell to around 2.5% ‐ around the rates seen in Q2 this year ‐ only to then rebound. Our baseline forecasts assume a similar mini cycle, albeit with only a modest growth rebound. ▀ We also assume that further major adverse shocks won't materialise, and that insurance policy moves by central banks will stop a plunge in investment and households from panicking. ▀ Still, recession fears should be taken seriously ‐ slowdowns can become self‐perpetuating. Once annual GDP growth has fallen by over 1ppt from its peak, the eventual decline typically ends up being much larger ‐ of the seven growth slowdowns since the late 1970s where annual growth slowed by over 1ppt ‐ four resulted in either a global recession or only a narrow escape from one. ▀ With US‐China tensions unlikely to recede and factors like the US yield curve inversion adding to the air of gloom, the latest downturn could gain momentum. ▀ Although reduced macro volatility and anchored inflation have made it easier for policymakers to deliver soft landings, the effectiveness of monetary policy has waned. And with China no longer acting as spender of last resort, it's vital that governments in advanced economies stand ready to pick up the slack

Housing cycles in the UK: a historical and empirical investigation

PurposeThe study looks at the characteristics of upswings and downswings for UK housing cycles. Specifically, the purpose of this paper is to empirically analyse cycles in house prices and housing affordability on the characteristics of persistence, magnitude and severity.Design/methodology/approachThe paper draws upon the triangular methodology of cycles and utilises housing data from the last three decades.FindingsFrom an empirical perspective, the study obtained four main results. First, the graphical trajectory of cycles in house price and housing affordability is highly synchronized. Second, upturns in both cycles tend to be longer than downturns on average. Third, the recent upturn in house prices and housing affordability is characterised by larger duration, magnitude and severity than the earlier case. Fourth, the latest downturn in both cycles is highly synchronised in terms of time occurrence, persistence, magnitude and severity; in addition, in both cases, the latest downturn is considerably smaller than the previous one. The study additionally indicates that on average the length of a complete house price and housing affordability cycle is 19 years on a peak-to-peak basis.Research limitations/implicationsThis paper is essentially exploratory and raises a number of questions for further investigation. Future research should, first, arrive at a more nuanced definition of affordability and, second, examine causality. The fact that two phenomena appear to have some significant synchronicity is not an indication that they are interdependent, although logic would suggest they might be.Originality/valueThis is among the few papers that analyses cycles in UK house prices. It is the first study that draws attention to the housing affordability cycle and the first to compare cycles in house prices with cycles in housing affordability.

International Real Estate Review

UK home prices often exhibit only moderate (and sometimes barely positive) correlation across different regions. This reflects segmentation in the national housing market and also provides an apparent opportunity for lenders and investors to diversify their exposure to regional downturns, for instance, by creating residential mortgage backed securities out of geographically dispersed home loans. Unfortunately, in a crisis, correlations may rise, and the benefits from geographical diversification may disappear just when investors desire them the most. By using a flexible generalized autoregressive conditional heteroskedasticity technique, we find that regional correlations indeed rose dramatically during the latest downturn, in some cases, to unprecedented levels. Moreover, this increase in co-movement was clearly financial contagion, and not merely interdependence. Lenders, as well as investors in mortgage-backed and other housing securities should thus not rely on house price correlations calculated during ¡§normal¡¨ times.

Gender and the business cycle: An analysis of labour markets in the US and UK

Starting from an improved understanding of the relationship between gender labour market stocks and the business cycle, we analyse the contributing role of flows in the US and UK. Focusing on the post 2008 recession period, the subsequent greater rise in male unemployment can mostly be explained by a less cyclical response of flows between employment and unemployment for women, especially the entry into unemployment. Across gender and country, the inactivity rate is generally not sensitive to the state of the economy. However, a flows based analysis reveals a greater importance of the participation margin over the cycle. Changes in the rates of flow between unemployment and inactivity can each account for around 0.8–1.1 percentage points of the rise in US male and female unemployment rates during the latest downturn. For the UK, although the participation flow to unemployment similarly contributed to the increase of the female unemployment rate, this was not the case for men. The countercyclical flow rate from inactivity to employment was also more significant for women, especially in the US, where it accounted for approximately all of the fall in employment, compared with only 40% for men.

La Tasa De Actividad En Espaaa: Resistencia CCclica, Determinantes Y Perspectivas Futuras The Spanish Participation Rate: Cyclical Resilience, Fundamentals and Future Projections

The cyclical resilience of the labour force has been one of the most notable features of the Spanish labour market during the latest economic crisis, despite the depth and duration of the recession, and in contrast to its performance in previous recessionary periods. The behaviour of labour supply has been driven by the favourable trend of the aggregate participation rate. Thus, this paper firstly analyses the cyclical performance of the participation rate over time using data from the Labour Force Survey for different demographic groups (by sex, nationality, age and educational attainment). The analysis reveals that the lower cyclical sensitivity during the latest downturn was driven by the stronger relative performance of labour force participation by Spanish women, highly educated workers and middle-aged and older people.In the second part of the paper, we estimate an empirical relationship between the participation rate, broken down into sex and nationality, and some of its main determinants identified in the literature. The ensuing estimation results will serve as a basis for conducting a projection exercise for the aggregate participation rate over a 10-year horizon. Overall, our results show that factors such as educational attainment, the fertility rate, the minimum wage, the pension system or the unemployment insurance system all prove relevant for labour participation decisions by individuals. The future course of these variables can help mitigate the negative impact on the labour supply arising from the expected population ageing in Spain.

Guest Editorial: A Balancing Act

Guest Editorial The inherent volatility in the oil and gas industry came into full force in 2014, with the culmination of increasing complexity, rising operating costs, and a rapid fall in oil prices. Getting through this latest downturn will require a balancing act between short-term measures to reduce costs while maintaining a long-term perspective on growth. While the cyclical rise and fall of the oil price hardly comes as a surprise, there is an obvious correlation between confidence in the industry and the price of a barrel of oil. In tandem with identifying the priorities and strategies for the year ahead, this was very much demonstrated in the findings of our fifth annual industry benchmark study, A Balancing Act: The Outlook for the Oil and Gas Industry in 2015.* Unlike in previous years, we felt the need to carry out the survey on industry confidence twice, three months apart, as we believed that the rapid drop in oil price at the end of 2014 may have skewed the results. We did indeed see a sharp drop in confidence between October 2014 and January 2015, from 62% being confident to hit their revenue targets down to 32%. The sharpest drop in confidence was seen in Asia, which dropped from 72% to 33%. The research not only compared results across a quarter of the year, but also from DNV GL’s 2014 industry outlook report, providing a snapshot of sentiment and a look ahead. A Test of Confidence Ongoing rises in operating costs colliding with a dramatic fall in oil prices made operators across the industry respond with further cutbacks in their capital expenditure plans and cost-cutting measures across their operations. Overall, 28% of respondents remain confident about the oil and gas industry going forward, down from 88% in 2014 and a high of 89% in 2013. The speed of the downturn inevitably hit home in several key areas: far fewer are confident of their capacity to meet revenue and profit targets this year. Less than one-third predict they will hit their revenue (32%) and profit goals (30%), and these percentages have more than halved from last year (70% on both). Low oil prices are now the biggest barrier to growth in 2015, cited by 68% of respondents, followed by weak global economy (35%), and uneconomic gas prices (20%) as well as tougher competition. The industry’s skills shortage, which has been the largest barrier to growth for the past 2 years, has fallen to 10th place (14%), jointly with geopolitical instability in key markets. It is concerning for the long-term health of the industry to see behavior so tightly bound to oil-price fluctuations. We essentially need to heed lessons learned from previous downturns and avoid repeating mistakes.

Contagion versus Interdependence Across Regional U.S. Housing Markets and Implications for RMBS Geographic Diversification Strategy

Executive SummaryHome prices in the United States often exhibit little (and sometimes even negative) correlation across different regions. This reflects segmentation in the national housing market and also provides an apparent opportunity for investors to diversify their exposure to regional downturns by creating residential mortgage-backed securities (RMBSs) out of geographically dispersed home loans. Unfortunately, in a crisis, correlations may rise, and the benefits from geographical diversification may disappear just when investors most desire them. Using a flexible generalized autoregressive conditional heteroscedasticity (GARCH) technique, I find that regional correlations indeed rose dramatically during the latest downturn, in some cases to unprecedented levels. Moreover, this increase in co-movement was clearly financial contagion, and not merely interdependence. Investors in mortgage-backed and other housing securities should thus not rely on house price correlations calculated during “normal” times.

Long-term survival in choroidal and ciliary body melanoma after enucleation versus plaque radiation therapy

Objective This study aimed to determine whether the long-term melanoma-specific mortality rate of patients with a primary choroidal or ciliary body melanoma treated by enucleation is appreciably lower than that of similar patients treated by plaque radiation therapy. Design Retrospective, nonrandomized, comparative clinical trial. Participants A previously reported group of 237 patients, 140 treated by enucleation and 97 treated by cobalt-60 (Co-60) plaque between May 1976 and June 1980, and a residual group of 122 patients, 51 treated by enucleation and 71 treated by Co-60 plaque, were identified by variable-by-variable range matching. Intervention Primary treatment by enucleation or Co-60 plaque radiation therapy was performed. Main outcome measures Melanoma-specific mortality and duration of post-treatment survival were measured. Results The melanoma-specific mortality rate was substantially worse in the original enucleation subgroup over the entire 15-year follow-up interval; however, differences in baseline prognostic factors between the subgroups are likely to explain the difference in survival curves. After elimination of patients with nonoverlapping values of individual clinical variables to adjust for recognized intergroup differences at baseline, there was no significant or clinically important difference in the 15-year mortality curves of the residual subgroups. The relative rate ratio for the treatment effect in the residual patients was 0.97 (95% confidence interval, 0.51–1.86). There was no late downturn in the survival curve of the plaque-treated patients or late crossing of the curves. Conclusion A large difference in survival between equivalent groups of patients with primary choroidal or ciliary body melanoma treated by enucleation versus plaque radiation therapy appears to be unlikely.

Hollis Automation Inc., Nashua, New Hampshire

Nashua is a city of less than 100,000 souls, but it will remain engraved in this chronicler's memory for as long as he lives. Why? Because he finished his visit to Hollis in the Nashua Memorial Hospital Intensive Care Unit! He hastens to state that this was not because he was shocked by what he saw at the Hollis plant! Notwithstanding, the city is essentially a high‐tech, red‐brick one (with a nucleus of beautiful, older, painted wooden buildings of the type for which New England is renowned). It is almost on the Massachusetts border, barely an hour's drive from downtown Boston. Apart from Hollis, some of the big names of the region, on both sides of the state boundary, are Wang and Digital Equipment, and many others. Until recently, the region registered full employment, but the late downturn in the computer industry has caused a certain amount of unemployment, but not necessarily to catastrophic levels, except for those without a job.

Job loss and the regional incidence of redundancies in the current recession

Industrial change is a two-sided process: it both creates new plants, production methods and jobs and displaces others at present in operation. But the two sides of this process rarely coincide in time or space, and in Britain over the past fifteen years or so the develop ment path of the economy has been increasingly dominated by displacement effects. Whether measured in terms of output, exports, investment or employment, there has been a cumulative weakening of the contribution of manufacturing to the national economy: an unprecedented 'de-industrialisation'. Although opinions differ over the precise causes of this persistent industrial decline, it is clear that the British economy has become caught in a process of declining external competitiveness, which is both a consequence and a cause of a deteriorating economic environment, characterised by low profits, the holding back of new investment and insufficient job opportunities (Blackaby, 1978; Hughes, 1981; Cambridge Economic Policy Group, 1982). It is the absolute decline in industrial employ ment, sustained now for some sixteen years and accelerated by the current recession, that is one of the worrying features of this deindustrialisation. From a peak level in 1966, total industrial employment has declined by over four million, of which three million is accounted for by jobs lost in manufacturing. During the 1970s there were some increases in service employment, especially in the public sector, which offset the decline in manufac turing jobs, but that offsetting trend came to a halt towards the end of the decade. Over the period 1966-81, service employment increased by just over one million, so that the loss of four million jobs in industry has been primarily reflected not by jobs created else where in the economy but by an increase in the army of unemployed of nearly three million. Industrial unemployment is now more than ten times what it was in 1966. This decline in the demand for labour has been characterised by a number of cyclical phases. Over the last decade or so, cycles in the rate of capital accumulation appear to have become more marked, and to have been accompanied by pronounced swings in the financial balance of a large number of firms and industries. Much of the labour displacement that has occurred during these crises has been concentrated in a single year within the four or five year cycle, as in 1967, 1971, 1975 and, in the current recession, in 1980. With out doubt this latest downturn is the most severe of the post-war period, an economic col lapse that has been sharply intensified by the Tory government's pursuance of restrictive monetarist policies to combat inflation and a laissez-faire approach to the supply side of