Hurst Analysis of Sectoral Capacity Utilization over the Business Cycle, 1948–2025

This article examines the business cycle with US macrodata using two techniques. First, aggregate consumption and investment are analyzed for substitution and complementarity over expansions and contractions. These results are used to assess empirical support for Keynesian, monetarist, and Austrian business cycle theories. Next, sectoral capacity utilization rates are examined with Hurst exponents to assess how different industries behave during the unsustainable expansion which precedes a downturn, after the crash, and during the recovery. Many asset prices and stock indices have fractal properties. One interesting result is that virtually all macroeconomic time series are antipersistent, suggesting that entrepreneurial experimentation drives even aggregate metrics. This finding presents extraordinary difficulties for new classical business cycle theories such as real business cycle theory, which requires that labor productivity and other factor productivity series exhibit persistent long memory. Over fifteen years of data have become available since the onset of the Great Recession. In particular, there is a need to analyze the causes of the Great Recession and the COVID-19 recession as well as the nature of the subsequent recoveries.