A Wall Street survey of economists in June 2016 suggests there is a 21% chance of recession in the next year.
Given that economists have never once predicted a recession in advance, 21% is a high percentage actually.
Economists now scramble to assess risk as Economic Gauges Raise Specter of Recession.
Hiring is slowing, auto sales are slipping and business investment is dropping. America’s factories remain weak and corporate profits are under pressure. All are classic signs of an economic downturn, and forecasters have certainly noticed. In a Wall Street Journal survey this month, economists pegged the probability of a recession starting within the next year at 21%, up from just 10% a year earlier. Some economists think the risk is even higher.
Signs of trouble extend beyond the job market. J.P. Morgan Chase economists have been gauging the odds of a recession using a model that incorporates an array of economic indicators, from business-sentiment gauges to auto sales.
As of last week, the model signaled a 34% chance of a recession within 12 months. That was down a bit from 36% earlier in the month but up from 21% back in January. Similar increases preceded the past three recessions.
There’s no foolproof tell of a coming recession. Data lags and revisions mean downturns can be difficult to identify even after they start. And rising worry doesn’t always pan out.
The recession odds spiked to 33% in September 2011, as tracked by the Journal’s survey of private forecasters. But the economy emerged more or less unscathed from a stretch of weaker hiring, political brinkmanship and financial-market turbulence.
A strong case can be made that the expansion is likely to remain on track this time, too.
Business leaders aren’t panicking. The Business Roundtable last week said U.S. chief executives have boosted their expectations for capital expenditures, hiring and sales in the coming months. Executives “don’t see an end” to the expansion, Caterpillar Inc. Chief Executive Doug Oberhelman said. “I think, for the most part, people believe that we can stumble along at 2% for a while longer if there’s not some big event from the outside.”
Recession Odds vs. Recession Declarations
- On December 2, 2008 the NBER Announced Official Recession
- On September 20, 2010, the NBER Announced Recession Officially Ended in June 2009.
Don’t count on any leeway.
Mike “Mish” Shedlock
Thank God the BEA is revising all the GDP figures from 11 years ago forward. Without it we’d probably be in recession this year. Eat drink and be merry.
Of course! The penny hadn’t dropped…. revise down prior years so that 2016 shows growth from the lower number. TA- DA! No recession during election year. (if that how the game is being played).
I think I am going to pretend that my salary was less last year so that I can say I had a pay rise this year.
It’s not over till Hillary sings. OK, what was the German Anthem in 1938?
Given the low cost of money and the glut of it available to borrow, any BEA statistic, or any statistic from anyone else, is lacking credibility. Eventually, interest rates will rise. Not today or tomorrow but it is inevitable no matter how hard central banks try otherwise. The low cost of money initially drives economic statistics higher than they otherwise would be and the accumulated debt that results causes economic growth to decline until the debt is repaid. Said debt will be doubly hard to maintain if it floats in cost. Hence, lots of activity is needed just to service debt accumulated for useless, unproductive purposes or financial engineering.
Govt statistics, such as CPI, were developed and modified primarily to lower the cost of social security payment increases due to inflation. Hence, inflation that never seems to be measured or measured correctly. Any GDP measurement that fluctuates because of FX valuation changes is somewhat meaningless because FX rates are constantly manipulated by central bank money printing all over the world. This quarter’s fall in GDP due to import / export changes will be offset next quarter for the same reason. The GDP statistic is somewhat meaningless now.
Economic forecasting is something of a scam. If economics were a science, everyone would substantially agree on everything. No doctors argue about the existence or actions of germs. All economists argue about elementary relationships and many suggest printed money is wealth and ignore the payment side of debt when arguing more debt is better than less debt. It has devolved into a sales scam. This also explains my derision of competing Fed bank GDP calculations. Mish tries to analyze the differences. I marvel at the distraction the Fed banks cause and see it as a sales scam of sorts, wondering about what are they really selling.
Unfortunately, nothing will change. The crooks will continue to run things. Some want a lot of benefits for a select few. Others want government to be the supreme entity and government coalitions, such as the EU, to control large collections of govts by fiat. The people are there to function as drones for some collective societal objective. War is a tool of economic development. The driving ideology among all participants who control at the top is, “I’ll be gone, You’ll be gone” when the consequences of their actions can no longer be kicked down the road.
The article doesn’t define what is a recession. There is a 21% chance the NBER will say there is a recession? A 21% chance the BEA will say there is a recession? A 21% chance the BLS will say there is a recession?
Or are we talking about the on-going recession for everyone outside of Washington/Big Banks that started in 2008?
Last I looked, the BLS said inflation was only 2% but ObamaCare premiums are going up 30%. I think the folks in Washington failed math class.
The NBER is the official arbiter of recessions. I am sure that is what will decide.
Mish
People (sorry “economists”) who can’t get a job in the real world (sorry again, “who work at a private non-profit think tank”) are the official arbiters of what is happening in the real world, an environment where they have never been.
Not making fun of you Mish, making fun of the armchair warriors who have never run an actual company, but somehow declare themselves experts on the subject.
Anyway, the correct answer is: “Recession is when you lose your job, recovery is when the bureaucrats lose theirs”
The Las Vegas oddsmakers told us that Golden State would win at home tonight by 5 pts. The Cavs won by 4.
I would still trust a sports oddsmaker 100x more than an economist, especially a university economist.
Economic forecasts (like political forecasts) have turned into a racket.
I believe nothing they say.
I think in future you should always use the term “official recession”. They can be quite different from REAL recessions…which it is not difficult to argue we’re already in….
Several factors have been inflating economic expectations. Four key issues in play are the tailwinds from China’s massive liquidity injection during the first part of the year, rising oil prices, technical factors indicating a breakout on the charts, and Janet Yellen’s recent rollback of when interest rates would increase.
Near the end of May as the Group of 7 finance leaders gathered in Japan, warnings of a coming global financial crisis were voiced, but in the end concerns were ignored and brushed aside. The article below argues more risk exist than many people want to acknowledge.
http://brucewilds.blogspot.com/2016/06/economic-expectations-inflated-by-four.html
“Given that economists have never once predicted a recession in advance, 21% is a high percentage actually.”
NBER stated last recession commenced December 2007.
Philadelpia Federal Reserve has a quarterly survey of professional forecasters. For Q4 2007 the survey canvassed 48 “experts” … only 18.89% chance of negative GDP for quarter (not the same as a recession call … and Q4 real GDP came out initially as 0.6%) … but …
https://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters
Keynesian pyramids are not GDP. Producing them slowly depletes the nation’s capital, thus leading to a future banana republic. NBER numbers are nonsense, because they don’t differentiate between factories producing items people actually want, and Keynesian pyramids.
Building millions of empty McMansions goosed GDP stats, but did nothing to improve Joe average’s lot. Joe actually moved backward as he was forced to bail out bankers.