Piger's Recession Probability Index for Jan. = 0.04
The chart above shows University of Oregon economics professor Jeremy Piger's "Recession Probability Index" from 2000 to January 2008, based on the 4 monthly variables used by the NBER to determine U.S. recessions: non-farm payroll employment, the index of industrial production, real personal income excluding transfer payments, and real manufacturing and trade sales. According to Professor Piger, "Historically, three consecutive months of recession probabilities exceeding 0.8 (see historical graph below) has been a good indicator that an expansion phase has ended and a new recession phase has begun, while three consecutive months of recession probabilities below 0.2 has been a good indicator that a recession phase has ended and a new expansion phase has begun."
Professor Piger's has a research paper on this topic, "A Comparison of the Real-Time Performance of Business Cycle Dating Methods," forthcoming in the Journal of Business and Economics Statistics. Comment: According to this methodology, the U.S. economy has not entered a recession, at least not through January.
7 Comments:
Psst don't tell these folks.
One in 6 West Virginians is on food stamps
http://www.dailymail.com/News/statenews/200803260077
Dr. Perry,
I am assuming he is using the Markoff-switching model to calculate this probability. Two notes of caution: 1) while the value of the probability is still low, note that the only times that it reaches even this low level are right before and after recessions - (not an absolute caution, but from this level the probability can climb very quickly indeed) and 2) I wonder if the model parameters were arrived at using regression methods - if so, how long ago? If this model is too new to have yet been used to predict a recession, I would be interested to see how it performs in the coming months.
Never fear, Comrade Bernake will save the day with another ingenious idea to centrally plan the financial industry.
That sound you heard is the idea of freedom in the financial industry dying a slow and painful death.
I can't wait for the GDP numbers in April that show first quarter results. Maybe that will convince you backward looking economists that we are indeed in a recession.
"One in 6 West Virginians is on food stamps"...
What a collection of parasites!
Then again what would one expect of a state that continually sends the King of Pork back to the Senate to leech off the nation's taxpayers?
"Never fear, Comrade Bernake will save the day with another ingenious idea to centrally plan the financial industry"...
Boy! Oh boy! Good point Machiavelli999!
Note what is posted by the always questionable Reuters: It would give the U.S. central bank authority to demand that all financial system participants supply it with full information on their activities and grant the Fed a right to collaborate with other regulators in setting rules for their behavior...
Can't Paulson, Bernake and Bush just stop pretending and come out for nationalization of the US banking system. After this new regulation bill comes through, we will be basically there already.
I love arguing with people about this. They tell me, "How can you defend free market capitalism in banking after you saw what just happened? Those bankers took crazy risks and gave away loans to people who obviously couldn't pay them!"
I reply: "Well, yea, but this did this because they knew that even if they messed up the state come in and save them. What reason would they have for not putting themselves at high risk? Not only that, the government encouraged (coerced?) them into giving out more bad loans by mandating that banks had to give a certain % of their loans to people in poor income communities."
So, don't tell me that free market capitalism doesn't work in the finance industry, because we don't have free market capitalism right now. If anything, this proves that government regulation doesn't work in the finance industry.
Piger's co-author Chauvet's Recession Probability Index for January = 0.40. here and here
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