US: Probability of recession

August 5 and  31 will be the next update of the probabilities of recession. And by then, must probably, another round of QE.

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The National Bureau of Economic Research (NBER) Business Cycle Dating Committee has been dating the U.S. expansions and recessions for the past 60 years. The members of the committee reach a subjective consensus about business cycle turning points, and this decision is generally accepted as the official dating of the U.S. business cycle.

Although careful deliberations are applied to determine turning points, the NBER procedure cannot be used to monitor business cycles on a current basis. Generally, the committee meets months after a turning point (that is, the beginning or end of an economic recession) has occurred and releases a decision only when there is no doubt regarding the dating. This certainty can be achieved only by examining a substantial amount of ex post revised data. Thus, the NBER dating procedure cannot be used in real time. For example, the NBER announced only in July 2003, 20 months after the fact, that the 2001 recession had ended in November 2001.

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Current probability of recession

Because of a two-month delay in the availability of the manufacturing and trade sales series, the probabilities of recession are also available only with a two-month delay. The Center for Research on Economic and Financial Cycles provides a calendar of release dates (conditional on the availability of data) for the probabilities of recession and the business cycle indicator.

The most recent probability of recession from the DFMS model is for April 2012, which uses information as available in June 2012. The probability that the U.S. economy is in a recession as of April 2012 is 4.2 percent.

For more information, see "Real-Time Probabilities of Recessions" and "The Beginning and End of the 2007–2009 Recession."



*Marcelle Chauvet is a professor of economics at the University of California, Riverside, and research director of the Center for Research on Economic and Financial Cycles.



References
Chauvet, Marcelle. 1998. An econometric characterization of business cycle dynamics with factor structure and regime switching. International Economic Review 39, no. 4:969–96.

Chauvet, Marcelle, and James Hamilton. 2006. Dating business cycle turning points. In Nonlinear time series analysis of business cycles, edited by Costas Milas, Philip Rothman, and Dick van Dijk. Amsterdam: Elsevier Science Publishing.