Thursday, December 09, 2010

NY Fed Model: 1-in-70 Chance of 2011 Double-Dip

The New York Federal Reserve updated its "Probability of U.S. Recession Predicted by Treasury Spread" this week with treasury yield data through November 2010, and the Fed's recession probability forecast through November 2011. The NY Fed's Treasury model uses the spread between the yields on 10-year Treasury notes (2.76% in November) and 3-month Treasury bills (0.14%) to calculate the probability of a U.S. recession up to twelve months ahead (see details here).

The Fed's model (data here) shows that the recession probability peaked during the October 2007 to April 2008 period at around 37-42% (see chart above), and has been declining since then in almost every month.  For November 2010, the recession probability is only 0.40% and for November of next year the recession probability is slightly higher, but still far less than 2% (1.42%). According to the NY Fed Treasury Spread model, the chance of a double-dip recession through November of next year is less than 1 out of 70.


At 12/09/2010 11:54 PM, Blogger Benjamin Cole said...

Die, recession, die, die, die an unlamented death.

Now, if we could just get the economy humming again....

At 12/10/2010 1:10 AM, Blogger James said...

This recovery looks like a recession to me.

At 12/10/2010 3:57 AM, Blogger PeakTrader said...

Even with the Fed's quantitative easing and the huge expansion of fiscal policy, the U.S. couldn't achieve a V-shaped recovery, after the severe recession.

It seems, fiscal policy (or economic policies from the Administration and Congress, including negative "jawboning") offset monetary policy.

If we had this type of massive stimulus in the early 1930s, there wouldn't have been a Great Depression.

This is the first recession, since the Great Depression, where real per capita GDP didn't fully recover a year after the trough, i.e. 2010 real per capita GDP isn't higher than 2007 real per capita GDP.

When the consumption side is included, it's doubtful the U.S. standard of living will be back to the 2007 level for many years.

At 12/10/2010 9:22 AM, Blogger morganovich said...

this model has never had any kind of reliable predictive value.

it missed the recession in 2001, 1982, 1976, and 1960.

it claims that recession is impossible of short rates are zero, which is demonstrably not true.

At 12/10/2010 2:19 PM, Blogger juandos said...

Hmmm, well the Dallas Fed in their December news letter 'seem' a bit less optimistic...


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