Is the US headed for a recession?6 November, 2012, 14:22. Posted by Zarathustra
Cullen Roche points to an interesting time series from FRED, which is the US recession probabilities time series by Jeremy Piger of University of Oregon. The description of the time series reads:
Recession probabilities for the United States are obtained from a dynamic-factor markov-switching model applied to four monthly coincident variables: non-farm payroll employment, the index of industrial production, real personal income excluding transfer payments, and real manufacturing and trade sales.
The latest reading for this time series (August 2012) was 19.56%, i.e. there is about 19.56% chance that the United States will enter into a recession. Interestingly, as Cullen Roche points out, there has not been any historical precedent where this level of recession probability did not come with an actual recession. So does it make a recession in the US a near certainty now despite strong recent economic data from the US? Or is this just a blip?