USA Recession Technicaly Confirmed

[icm63]

Ok you may laugh, and just say, I know there is a recession on, because I can just look out the window and see how bad it is. Well here is a 100% accurate recession 'is on as we speak' indicator, since 1946.

The year on year rate of change of the official civilian unemployment rate is the measure, and when this passes 15, then every time it has done this USA has been declared in a recession at a latter point in time (see 3rd panel)

1st Panel - USA GDP and USA GDP without exports
2nd Panel - Civilian unemployment rate
3rd Panel - Rate of change of series in 2nd panel

USARecessionConfirmed.gif

I wont be betting against these odds !

[Mega]

Re: USA Recession Technicaly Confirmed

No,no.......Good point i had a feeling i get the "News" here 1ST!
Mike

[FRED]

Re: USA Recession Technicaly Confirmed

Ok you may laugh, and just say, I know there is a recession on, because I can just look out the window and see how bad it is. Well here is a 100% accurate recession 'is on as we speak' indicator, since 1946.

The year on year rate of change of the official civilian unemployment rate is the measure, and when this passes 15, then every time it has done this USA has been declared in a recession at a latter point in time (see 3rd panel)

1st Panel - USA GDP and USA GDP without exports
2nd Panel - Civilian unemployment rate
3rd Panel - Rate of change of series in 2nd panel

[ATTACH]519[/ATTACH]

I wont be betting against these odds !

Can everyone see this graph? Some members using Firefox see only the string: "Name: USARecessionConfirmed.gif Views: 39 Size: 32.2 KB" but no image. That's why I embedded it as an image.

[mesyn191]

Re: USA Recession Technicaly Confirmed

I've got FireFox3, I can see it fine.

[Rajiv]

Re: USA Recession Technicaly Confirmed

I am using Iceape (firefox) I saw icm63's attachment as "Name: USARecessionConfirmed.gif Views: 39 Size: 32.2 KB" but no image.

However I see in your copyof icm63's post, I see it as a clickable link Attachment 519.

When I click on that, I am asked to login again. After logging in again, I see Icm63's posted image -- but your's still shows up as a clickable link.

[icm63]

Re: USA Recession Technicaly Confirmed

UK GDP Q2 -0.00%
JPY GDP Q2 -0.06%
EUR GDP Q2 -0.05% (Germany)

USA GDP Q2 1.9% (with GDP price deflator at 1.1%, and PCE at 4.3%)

Q: Whos telling porkies then ?
A: USA

NOTE: Also the rate of change of the Unemployment rate when decreasing looks like a good early warning signal for when things start to get better.

[Slimprofits]

Re: USA Recession Technicaly Confirmed

that is a great f'n chart. So peak unemployment in 2011?

[icm63]

Re: USA Recession Technicaly Confirmed

Other postings that may interest you. Yes I have been playing with my new charting toy over at Economagic.com

First, Recession predictor 95% accurate since 1955
http://www.itulip.com/forums/showthread.php?t=4679

Second, USA GDP analysis
http://www.itulip.com/forums/showthread.php?t=4752

Third, USA Consumer GDP analysis (70% of USA GDP)
http://www.itulip.com/forums/showthread.php?t=4774

Conclusion: Consumer lead recession.

Disclosure: LONG SKF,SCC

[metalman]

Re: USA Recession Technicaly Confirmed

Other postings that may interest you. Yes I have been playing with my new charting toy over at Economagic.com

First, Recession predictor 95% accurate since 1955
http://www.itulip.com/forums/showthread.php?t=4679

Second, USA GDP analysis
http://www.itulip.com/forums/showthread.php?t=4752

Third, USA Consumer GDP analysis (70% of USA GDP)
http://www.itulip.com/forums/showthread.php?t=4774

Conclusion: Consumer lead recession.

Disclosure: LONG SKF,SCC

nice. putting on your forecasting hat, what's the outlook? itulip says early 80s sized unemployment is coming. what say you?

[icm63]

Re: USA Recession Technicaly Confirmed

There is a high correlation between FDIC banks tightening lending standards chart and seriousness of unemployment.

The number of banks that tightened lending standards is as bad if not worse as that of 1991/2001. So the unemployment rate has every chance of being as bad if not worse than that of 1991/2001 unemployment rate.

The current credit crisis is not the same as 1991/2001. So my bet Itulip are on the money.

[icm63]

Re: USA Recession Technicaly Confirmed

This chart has employment data, with FDIC lending standards at the bottom.

Shaded red areas are recessions.

USAEmploymentstudy.jpg

[FRED]

Re: USA Recession Technicaly Confirmed

There is a high correlation between FDIC banks tightening lending standards chart and seriousness of unemployment.

The number of banks that tightened lending standards is as bad if not worse as that of 1991/2001. So the unemployment rate has every chance of being as bad if not worse than that of 1991/2001 unemployment rate.

The current credit crisis is not the same as 1991/2001. So my bet Itulip are on the money.

Lending standards are indeed a major part of our model. Without giving away too many secrets, also housing permits issued and average duration of unemployment.

[icm63]

Re: USA Recession Technicaly Confirmed

Ed,

I think you will find that Economagic.com is less code buggy now (data > no comment), after many emails from myself. I found Ted at Economagic.com to be a great help, and I have found the site to be an excellent source of fun (Economic wise).

Looks like the housing market is turning out to be more influential than its 5% of GDP.

[metalman]

Re: USA Recession Technicaly Confirmed

Ed,

I think you will find that Economagic.com is less code buggy now (data > no comment), after many emails from myself. I found Ted at Economagic.com to be a great help, and I have found the site to be an excellent source of fun (Economic wise).

Looks like the housing market is turning out to be more influential than its 5% of GDP.


:p:p

EJ: Interesting that you mention the increase in military spending. That’s not discussed much. I'll relate it to events here in the Boston area for local readers. The Boston Globe recently ran a piece—“The defense dollars flow: In antiwar state, contracts have soared since 9/11"—that goes a long way toward explaining why the economy is doing as well as it is in our area, the suburbs outside Boston. The growth ain't coming from biotech: I'll quote from the article, "Since 2001, contracts awarded annually to Massachusetts companies by the Pentagon have surged from $5.3 billion to $8.3 billion. Almost $1,300 is being spent by the military for every man, woman, and child in Massachusetts." Military spending contributes three times as much to the local economy as biotech. This explains why the nearby Burlington Mall, for example, is packed this holiday shopping season. Since we didn't make your county list, this local phenomenon is apparently not outstanding and so perhaps is occurring across the United States near the levels we are seeing here, with defense contracts increasing 30 to 40 percent.

OK, so here we are with a post-tech stock bubble economy dependent on housing and military spending. What's next? Do you think the collapsing housing bubble is enough to throw the United States into recession?

JG: I agree that housing is in free-fall. Can it throw economy into recession? Maybe, maybe not. Demand for new homes will fall off a cliff. This will have a substantial impact, but employment directly related to housing, such as in construction, probably isn’t large enough to throw the economy into recession on its own. The decline in the housing bubble may shave 1% to 2% off Gross Domestic Product (GDP) growth next year. Even the White House is building that into its forecasts going forward at this point.

EJ: The tech industry represented only about 2 percent of the economy when the NASDAQ bubble collapsed and sent that industry into a depression from 2001 until 2004. What surprised many, but not us, is that the contraction of that relatively small industry threw the entire U.S. economy into recession from Q2 until the end of Q3 2001.

JG: Two points. One, you can trace the roots of the housing boom back to the Tax Reform Act of 1986. That legislation eliminated the tax deductibility of interest except for mortgages, and had the effect of increasing homeownership. I doubt this was specifically intended. The later housing boom was the result of low interest rates that the Fed undertook as a policy after the extreme stresses put on the economy by the crash of the tech stock bubble and then 9/11. Two, the negative wealth effect of a collapsing stock market is more immediate and concentrated than the impact of a housing slowdown. Everyone marks their portfolio to market within a quarter after the collapse. A housing bubble deflates slowly. Housing price value changes are not experienced by property owners until they try to turn the property into a liquid asset, either by selling or by refinancing. Home owners do this at different times and in various places, so there is no rapid, geographically concentrated negative wealth effect as there was after the tech stock crash. When a housing market pops, the result is more like a soufflé than a bubble. The extent of the economic impact of the housing market decline depends more on secondary effects than on employment directly related to housing. If the negative wealth effects of falling home prices are transmitted to consumer spending, they will then affect business spending, and then we may have a recession.

EJ: That said, I'm going to persist on this aggregate negative wealth effect issue because it's critical to getting a handle on next year's recession. A report by Eric Belsky & Joel Prakken, "Housing Wealth Effects: Housing’s Impact on Wealth Accumulation, Wealth Distribution and Consumer Spending," Joint Center for Housing Studies, Harvard University, December 2004, page 2, says: "Consumers spend about 5 cents (5.5 percent) out of every dollar increase in housing or stock wealth in the long run. It takes about one year for spending from housing to reach four fifths of this long-run effect compared with several years for stock wealth.”

For example, a $25,000 (11 percent) increase in median home values from $200,000 to $225,000 resulted in a $1,250 (5 percent) increase in per household consumption, or roughly $50 of increased spending for every $1,000 in housing price rise, within about a year after the housing price increase.

JG: However, that does not necessarily mean that prices will decline in a similar fashion on the way down, that is, maybe not a $50 decline in consumer spending per $1,000. It could be less.

EJ: Still, will the ongoing decline in housing wealth, while slower to transpire and affect consumption spending, have a greater impact on real GDP than stocks because housing wealth is three times as great as stock wealth in relation to total household net worth?

JG: That's a fair point.

EJ: In January 2005 I projected a 10-year correction in the housing market. Normally, these corrections take five to seven years, but given the extremes of this boom, a more severe correction is likely. Do you agree?

JG: Five to seven years is the historical norm.

Dr. James K. Galbraith Interview - Janszen

if the crash of tech at 2% of the economy can throw the who economy into recession why not housing at 5%? the indirect impact is much bigger.

[Jim Nickerson]

Re: USA Recession Technicaly Confirmed

if the crash of tech at 2% of the economy can throw the who economy into recession why not housing at 5%? the indirect impact is much bigger.

So your econometric leanings are that the equity markets are headed much lower that they have gone so far?

What do you think? 10%, 15%, 20%, 25% more, or choose your own number.