NY Fed's Model Predicts End of Recession in 2009
According to the New York Fed, "Research beginning in the late 1980s documents the empirical regularity that the slope of the yield curve is a reliable predictor of future real economic activity."
Yesterday, the New York Fed released its latest "Probability of U.S. Recession Predicted by Treasury Spread," with data through January 2009 and its recession probability forecast through 2010 (see chart above, click to enlarge). The NY Fed's model uses the difference between 10-year and 3-month Treasury rates to calculate the probability of a recession in the United States twelve months ahead (see chart below of the Treasury spread).
Bottom Line: The New York Fed's Treasury spread model predicts the end of the recession in 2009.
Thanks to Andrew Greene for the tip.
Update: According to Brian Wesbury and Robert Stein in Forbes, "Some early warning signals suggest an economic recovery should start taking hold by mid-year."