The stars mark the actual strength of revival in the first year of recovery, and the dots on the regression surface mark the corresponding regression estimates.
I would encourage everybody to look at this chart more closely later on, but let’s highlight the first year of recovery following the recession that ended in 2009... where you can see that if we’d had that severe a recession in the late 1940s, we would have expected a rebound on the order of 14%, up here.
Also, it’s only because the recession was so severe – all the way back here – that we managed a rebound over 3%. In other words, if the recession had been half as deep, the expected rebound would be less than 1% in the first year in terms of USCI growth.
At the end of the day, this chart tells us that the size of the V-shaped recovery in the first year of revival is linked to both the depth of the recession and the passage of time, a proxy for structural change, which we will soon touch on.
However, following the first year of recovery, it’s a different picture.
This chart is very similar to the previous one, with the same independent variables: the passage of time and the depth of recession.
The crucial difference is that the dependent variable on the vertical axis is the average pace of growth during the expansion following the first year of recovery.
Notably, in sharp contrast to the results shown in the previous chart, this relationship is not statistically significant, which is why we faded out the colors.
If anything, to the extent that there is any loose relationship, it is the opposite of what one might expect.