From Zero coverage
Given the long lag between recession indicators and economic downturn, it is not surprising that economists have given up on predicting a recession. However, even though the recession hasn’t happened yet, that doesn’t mean it can’t still happen. We need to pay particular attention to data historically correlated with economic growth.
To recap, here are the indicators that the NBER uses to determine peaks and troughs, but not in “real time.”
Figure 1: CES non-agricultural employment (NFP) (bold blue), civilian employment (orange), industrial production (red), personal income excluding current transfers in Ch.2017 $ (bold green), manufacturing and commercial sales in Ch.2017 $ ( black), consumption in $Ch.2017 (light blue) and monthly GDP in $Ch.2017 (pink), GDP, 3rd version (blue bars), all logarithmic normalized to 2021M11=0. Source: BLS via FRED, Federal Reserve, BEA 2024Q1 advance release, S&P Global Market Overview (nee Macroeconomic Advisors, IHS Markit) (5/1/version 2024) and calculations by the author.
Everyone has their favorite indicator: vehicle miles traveled, gasoline consumption, growth of full-time workers, etc. I’ll just point out that the weekly Lewis-Mertens-Stock Economic Index is reading 2.05% – right on trend if the trend is 2% – using data released through May 18.
THE Baumeister, Leiva-Leon, Sims Weekly Indicator of Economic Conditions recorded -0.52% (around half a point below trend growth).
So the recession could still appear, maybe in six months, maybe next month. A simple forward spread model indicates that May is the month with the highest probability of a recession, so it could still happen. Or not.
