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Larry Kudlow Forecasts

Larry Kudlow Forecasts

Mr. Kudlow is apparently on the short list for new National Economic Committee chair. Maybe a good time to review some of his macro predictions.


Figure 1: Case-Shiller US National Home Price Index, s.a., deflated by CPI-all (blue, left scale), and real GDP, bn. Ch.2009$ SAAR (black, right scale). NBER defined recession dates shaded gray. Red line at 20 June 2005 comment on housing bubble, and pink line at 7 December 2007 on recession. Source: S&P, BLS via FRED, BEA (2017Q4 2nd release), NBER, and author’s calculations.

Jeffry Frieden reminds me that Larry Kudlow makes an appearance in our book, Lost Decades (page 46).

A few months later Larry Kudlow, the National Review’s economics editor, wrote a column titled “The Housing Bears Are Wrong Again,” whose subtitle claimed that the housing sector was “writing [a] how-to guide on wealth creation.” In it, Kudlow dismissed “all the bubbleheads who expect housing-price crashes in Las Vegas or Naples, Florida, to bring down the consumer, the rest of the economy, and the entire stock market.”

Then in December 2007, Kudlow wrote:

There is no recession. Despite all the doom and gloom from the economic pessimistas, the resilient U.S economy continues moving ahead’”quarter after quarter, year after year’”defying dire forecasts and delivering positive growth. In fact, we are about to enter the seventh consecutive year of the Bush boom.

To quote Bill McBride, “Larry Kudlow is usually wrong.”

Update, 4:30PM Pacific: Sigh. Reader Jeff seems annoyed that I didn’t plot the post-2012 data on home prices. Here is the graph with data extended backwards and forwards. I don’t think it changes anything in my mind regarding the usefulness of the “bubblehead” comment in 2005.


Figure 2: Case-Shiller US National Home Price Index, s.a., deflated by CPI-all (blue, left scale), and real GDP, bn. Ch.2009$ SAAR (black, right scale). NBER defined recession dates shaded gray. Orange shading denotes period 2017Q1 onward. Red line at 20 June 2005 comment on housing bubble, and pink line at 7 December 2007 on recession. Source: S&P, BLS via FRED, BEA (2017Q4 2nd release), NBER, and author’s calculations.

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