Tag Archives: New York Fed

Chance of Recession

I’ve been a reader of Mark Perry’s for years and years.  I love his stuff.  One of my favorite installments that he runs is the “Chance of Recession”.  Here, he highlights data delivered by the New York Federal Reserve bank.

The bank does a  neat analysis of some different values and comes up with the chance that the economy will be in recession in the next year.  The data isn’t perfect, but the rough strokes are enlightening.

Let’s look.

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Some Notes on Chance of Recession

Last month, I posted the NY Fed’s “Chance of Recession” spread.  It’s a fun little chart that shows the chance that our economy will be in recession in the next 12 months.  It’s SUPER fun now because the value is about as low as it’s ever been; 00.041%.

TJIC called shenanigans:

So you think that the chance of a recession is 200:1 against?

Tell you what, I’ll offer you great odds – 100:1 (that’s twice what the data suggests).

Good point.

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June 6, 2010: Chance of Recession in the Next 12 Months — 00.041%

If anything has changed in the last month it’s the fact that the chance of recession reduced by 20%.  We went from the ridiculously low chance of .055% all the way down to .041%.  The only times in the last 50 years it has been this low was in 1983 for 2 consecutive months; August and September.

As for the “current” recession, NBER takes an exceptionally long time to officially declare the end, up to 24 months.  As I have been on the record as saying, I think the recession ended late May 2009; NBER won’t score it until January 2011, longer if I am wrong.

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April 5th, 2010: Chance of Recession in the Next 12 Months — 00.055%

Very little has changed since March 1st.

In essence, the New York Fed says that there is a 00.055% chance that the country will enter or be in recession by April 2011.

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March 1st, 2010: Chance of Recession in the Next 12 Months — 00.043%

Using data from the New York Federal Reserve, the chance that the United States will enter a recession in the next 12 months is 0%.  The Vikings have a better chance of wining the Super Bowl!  For perspective, you have to go back to September of 1983 to find a period in time when there was less of a chance.

Hat Tip- Mark Perry: Carpe Diem