IMagine you sail a ship through thick fog, looking for the ground. One of your sites is the types of birds that are usually found abroad. It seems like now that you are approaching the Earth, but it is impossible to know it with certainty until you see the coastal line. If the American recession is land, the “birds” are already turning. But these scenes do not offer any guarantees of what awaits us, only the possibilities.
The inverted return curve, when the long -term interest rate decreases to or less than a short -term rate, is usually an indication of stagnation. The average bonds for 10 years an act Located below The treasury rate for three months in March, although the two are now at the same level. In any case, the return curve does not tell us much. It simply reflects the financial market expectations that the US Federal Reserve may reduce short -term interest rates in the future, which in turn reflects the expectations that economic activity may stumble.
Consumer confidence is a more direct indication – especially to predict home demand. Two long metrics for consumer confidence, conducted Michigan University and ConferenceHe showed sharp drops in March, when Donald Trump’s tariff threats began to be fulfilled. the Michigan surveyConsumer morale index, which has decreased since the beginning of the year, Decline Last 11 % on April 11 – much less than middle In the previous recession and The second is less The level since the records started in 1952.
The Federal Reserve in New York Consumer expectations Likewise, reports that families’ expectations about their financial positions deteriorated in March. Similarly, Business confidence – Who guides the employment and investment decisions for companies –CollapseOn April 4, not only In the United States but GloballyDue to the uncertainty about Trump’s “mutual” tariff.
In the endeavor to determine whether the recession is imminent, one may also search Professional predictionsAbout 50 of them are collected by Financial expectations for the blue slide. Two other sources possess the total expectations Wiping from professional predictors and Wall Street Journal. On April 17, the latter showed an average expectation of 0.44 % for the first quarter, and the possibilities of the most higher recession from the beginning of the year. But WSJ and SPF surveys are spread only once every quarter and can become old quickly.
In any case, what people say may be feasible than where they put their money. The prediction markets doubled three times in the difficulties they put on the recession after March 3, when Trump applied a 25 % tariff against Canada and Mexico, and April 2, when it declared “a mutual tariff”. As of April 19, Polymarket He appears A 57 % chance of stagnation in the next year, and Calish Come In 59 % – about four times the level per normal year (15 %). If you have to look at only one type of estimate, it is possible that the prediction markets are.
Prediction prediction is one thing; Determining when one really started is another. Instead of sending the decline before it happens, Sahm base stagnation index He says that the economy is in a stagnation if it is average average for three months from Unemployment It rises by at least 0.5 points, relative to the lowest point in the previous 12 months. At the present time, the index does not indicate a recession: Unemployment It is still low with historical standards. But companies sometimes stop the decision to benefit from workers in response to the decline in demand, especially in times of increased uncertainty as is the case now, even after some unwanted stockpiles accumulated, and/or reduce their production and workers Week hours.
A number of other early measures of actual economic activity can help us to determine the recession. Surveying the indicators of purchasing managers (PMI) private sector companies to learn, for example, whether they have seen new orders to rise or decrease during the previous month. American Supply Management Institute PMI manufacturing It fell to 49 in March. Readings are less than 50 indicating contraction.
Census Retail sales data Introduce data on the family consumption To be available – it also reveals, since private consumption is almost Two -thirds From us GDP. The March report referred to the continuous growth, although it is largely driven by high car sales of consumers who were trying to apply for imminent definitions.
Of course, the standard that approaches the recession is the period of growth of the gross domestic product (in most countries, which lasts two consecutive quarterly). But only the GDP has been reported every three months, with great delay (and that it mostly Reference Later). Therefore, “NoWCSTS” has emerged to provide actual time of GDP, based on the latest relevant indicators, such as PMI, industrial production and retail sales. Estimating the growth of GDP in the first quarter by the most prominent United States Nowcast, Atlanta Federal Reserve gross domestic productIt fell on a shelf at the end of February, from the top +2 % to less than -2 %. Even after amendment to An extraordinary increase In gold imports, GDP shows a decrease in growth to a little less than zero in April.
While birds that do not offer any guarantees, the NoWCast indicators can indicate that we have come there. Thus, they can be considered groups of rocks or shallow. But until then, it may be or not to be linked to a larger ground block. In fact, although the recession is under implementation, we do not know with certainty that this is what we are witnessing.
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responsible Ruling From us Running It is the National Office for Economic Research Business course dating committeeany Look at Variables like gross domestic productReal personal income (except for social transfers), functions of non -agricultural salary, real personal consumption expenses, manufacturing and commercial sales (modified for price changes), and industrial production. Only when all the data is – usually a year or so after the truth – the committee announces turning point.
This does not help the sea that moves through fog. Based on the current information, I would like to put the risk of American recession up to 60 % for the next year – in line with the prediction markets – and even higher over the next four years. Although nothing certain, we should not be surprised if we run.
Jeffrey Frankl is a professor of capital formation and growth at Harvard University. He served as a member of the Economic House of Economists for President Bill Clinton.
