Smoothed 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. This model was originally developed in Chauvet, M., "An Economic Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching," International Economic Review, 1998, 39, 969-996.
The following chart compares the recession probabilities seen starting in 2006 to those seen starting in 2012. I'm looking specifically for the formation of tiny cracks in the dam.
Click to enlarge.
What a structural engineer might say: "The cracks are growing again. Might want to get that fixed before it fails entirely again."
What Jamie Dimon might say: "So we're kind of confident that you'll see growth over the years as America recovers."
Reality Check: Kind of Confident = Not Confident
Nobody who is truly confident says kind of confident, just like nobody who is truly pregnant says kind of pregnant.
May 18, 2012
I'm going to predict the next recession will hit on or before October 2014.
For what it is worth, my long-term prediction stands. That said, the odds of making it to October 2014 seem smaller now. As I have stated previously, I am not at all optimistic about this year's Christmas season.
This is not investment advice. I am being kind of sarcastic though, in honor of Jamie Dimon.
St. Louis Fed: Smoothed U.S. Recession Probabilities