Weekend reports on a note from UBS arguing the US has a 93% chance in recession this year. I guess that means 93% chance the US is already in recession. I doubt it, but here is more. The reports state that:
- UBS’s forecast based on its assessment of several indicators like personal income, consumption, industrial production and employment
- UBS says the economy has reached “historically worrying levels”
- UBS says the US economy is “soggy, soft, weak, yes, but not collapsing”, and analysts at the bank have not said firmly the country is in recession
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I haven’t seen the note, just passing along what is being reported from it. Like I said above, I doubt the US is in recession. Note that, it takes year(s) for recessions to be officially dated, the U.S. doesn’t officially date recessions in real time. That role is handled by the National Bureau of Economic Research (NBER) Business Cycle Dating Committee. Here’s how it usually works:
- Lag of 6–18 months: NBER usually declares the start (or end) of a recession well after the fact. The average lag is about 8–12 months once enough revised data is available.
- NBER looks at a range of monthly and quarterly data (GDP, employment, income, sales, production) and waits for revisions to make sure the downturn is both broad and persistent.
They avoid premature calls, since initial data is often revised significantly.
In the meantime, markets and policymakers usually work off real-time indicators (payrolls, GDP estimates, PMIs, yield curve, credit spreads) rather than waiting for NBER. By the time NBER makes the call, investors and the Fed already know the economy is in (or out of) recession.
Also in the meantime, traders hit bids and offers, not fret too much about economic definitions and point scoring.
