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How we will know when a recession is coming?

brookings.edu

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Re: How we will know when a recession is coming?

#81

Post by bhouston »

MegaButts wrote: post #23

Out of curiosity, how reliable are all of the metrics we use for measuring economic health? For instance, how reliable is the unemployment rate when it is a highly political number with lots of incentives to misrepresent (ie the chronically unemployed are excluded from the count)? Beyond that, how much are these indicators just fudged or straight-up lied about? Everybody is happy to agree with me when I say that Chin…

The only problem is the government first uses an estimate and the later retroactive adjusts the number I believe.

Re: How we will know when a recession is coming?

#82

Post by Consultant32452 »

anm89 wrote: post #4

This is a really interesting metric but I'm going to argue that it doesn't say that much about our current situation given that our current unemployment numbers are highly skewed due to a strong shift towards low quality part time work and a large number of people opting out of the labor search (who are not considered unemployed in these statistics). I could see an argument made that given that this is statistic is r…

No single metric is going to give a full picture. However, to my understanding work force participation has been going up and there's been upward pressure on wages at the lower end.

Re: How we will know when a recession is coming?

#83

Post by rossdavidh »

jedberg wrote: post #78
andrewla wrote: post #28

Earlier quoted context omitted.

There's a name for the phenomenon, Goodhart's Law [1]. Generally, once a metric is used for decision making, it no longer reflects the phenomenon that it is attempting to measure. Making it much more complicated is the fact that methodologies vary from year to year, and are often created by averaging data from a number of different sources. I've become fairly convinced that almost all macroeconomic measures are so fl…

> The exceptions tend to be metrics that require skin in the game to shift -- the yield curve inversion or S&P500 index I agree with you on the S&P500, but isn't the yield curve fairly easily manipulated by the Federal Reserve and their rate setting activities?

I think the idea is that would impact more than just the politics, it would actually impact the rate of interest banks and others pay, so there is incentive to disregard the politics at least to some degree.

Re: How we will know when a recession is coming?

#84

Post by bhouston »

tinktank wrote: post #45
SeeDave wrote: post #3

Will the US economy experience a recession in the next... 100 years? Yes!!!! 50 years? Yes!!! 25 years? Yes!! 12.5 years? Yes! 6.25 years? Yes 3.125 years? Yes? 1.5625 years? Maybe .78125 years? Maybe? .390625 years? No? 0.1953125 years? No 0.09765625 years? No!

You make an astute point lost to those trying to time the market.

I decided to be mostly cash now rather than stocks. I just can not buy stocks when they are this high as I worry what is the upside. Stock markets fall the most as soon as we enter into a recession and they recover fast so I want to be prepared.

I am likely too soon though...

Re: How we will know when a recession is coming?

#85

Post by code4tee »

People have been calling for a recession/big market correction since around 2012. At some point an analyst will be right and then they’ll hold the throne of “this analyst predicted the last recession... hear what they think now” until the cycle repeats itself again.

Those that have been around a while know this whole story plays out on a loop over and over and over :-)

Re: How we will know when a recession is coming?

#87

Post by fuzz4lyfe »

50656E6973 wrote: post #65
drevil-v2 wrote: post #56

Earlier quoted context omitted.

> They're only JUST NOW starting to get payed what they deserve That is absurd. In a free market with free movement of goods and people, whatever you are getting paid is what you "deserve" aka what other participants in the market are willing to pay for your services. It is only explicit government intervention that overrides this process; subsided renewal energy sources, childcare, housing etc. But with everything e…

Do you consider it a free market if the government bails out big price manipulators when their scheme implodes?

I don't. Most free market thinkers aren't the GOP talking heads you see in the news. Those guys made their fortunes via regulatory capture, war and protectionism for the most part. Frankly it seems they have ridden that train into the ground the values of conservatives can only bend so far before voters start asking questions the politicians can't answer. Only socialism can provide the level of market control that the corporatists crave. Notice how firms got 'woke' all the sudden? Do you really think Pepsi is all about social justice?

Re: How we will know when a recession is coming?

#88

Post by bhouston »

iamwil wrote: post #50

For fun, I put together http://isitrecession.com , in the spirit of https://isitchristmas.com It just shows the inverted yield curve, pulling down data from the US treasury everyday, and subtracting the 1 year from the 10 year interest rate.

What defines a recession? Contraction of business right? Not just inverted yeild curve.

Re: How we will know when a recession is coming?

#89

Post by streetcat1 »

29_29 wrote: post #34
buboard wrote: post #17

Maybe the recession will never come? What are we going to do now without the recession? In a way, that thing was a solution.

Impossible. Ray Dalio explains the business cycle and why recessions are inevitable with our credit based system https://youtu.be/PHe0bXAIuk0

Possible.

The system got broken by the 2009 rescue attempts (QE 1,2,3).

We are in a different regime right now (negative interest rates). I would not bet on any recession now or in the future.

Re: How we will know when a recession is coming?

#90

Post by JamesBarney »

MegaButts wrote: post #23

Out of curiosity, how reliable are all of the metrics we use for measuring economic health? For instance, how reliable is the unemployment rate when it is a highly political number with lots of incentives to misrepresent (ie the chronically unemployed are excluded from the count)? Beyond that, how much are these indicators just fudged or straight-up lied about? Everybody is happy to agree with me when I say that Chin…

The U.S. isn't perfect, but it's not China.

Also most of the important numbers that the average person cares about such as inflation or unemployment are collected in a very rigorous way that is hard for a government officials to modify without leaving a damning paper trail. Not to mention the vast majority of private measures match up with these numbers.

These measures are by no means perfect. The unemployment rate has significantly over estimated the health of the economy since the great recession, but this isn't due to a conspiracy. It's caused because it systematically under counts people who have dropped out of the labor force, or are under employed. (This is for the most popular unemployment rate number, there are much better employment numbers to use that don't suffer from this issue.)

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