Last November, I mentioned a recession probability chart from the St Louis Fed that was making the rounds, and that some people were misusing the chart to argue a new recession was starting in the US. Below is an update to the chart.
A few weeks later – also in November – the author, University of Oregon Professor Jeremy Piger, posted some FAQs and data for the chart online. Professor Piger writes:
2. How should I interpret these probabilities as a recession signal?
Historically, three consecutive months of smoothed probabilities above 80% has been a reliable signal of the start of a new recession, while three consecutive months of smoothed probabilities below 20% has been a reliable signal of the start of a new expansion. For an analysis of the performance of the model for identifying new turning points in real time, see:
Here is the current chart from FRED at the St Louis Fed.
Right now, by this method, the odds of the US currently being in a recession are very low (close to zero). Some day I’ll be on recession watch again (not in the near future), and this is one of the tools I’ll be using.