The Economic Perspective: “Predicting a Recession”

This is Mary Walden with economist MW, welcoming you to the economic perspective.  Today’s program looks at predicting a recession.  Mike, economists have always had trouble predicting a recession.  Now I understand that an economist at the Federal Reserve has developed a model that seems to work much better than others.  Please share it with us.

  • Economists have had trouble not only predicting recessions, but knowing in real time if we’re even in a recession
  • Normally a recession is not realized until many months after it has started
  • Now an economist at the Fed has developed an indicator that signals whether the economy is in a recession now
  • If the average unemployment rate over the last three months has risen at least ½ percentage point above the lowest unemployment rate for the past year, then we’re in a recession
  • This method would have called every recession since 1970, with no false calls
  • Fortunately, right now the indicator is not flashing recession
  • I’m MW

And I’m Mary Walden for the Economic Perspective, an NC State Extension program from the Department of Agricultural and Resource Economics