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Unemployment drops during an expansion, then rises heading into a recession. It turns out you can quantify this relationship as a recession predictor: > Accord

by aazaa 7y ago

Unemployment drops during an expansion, then rises heading into a recession. It turns out you can quantify this relationship as a recession predictor: > According to LaVorgna, since 1948, the economy has always entered or been in a recession when the unemployment rate increases 50 basis points (or 0.50 percentage point) from its trailing cyclical low. https://www.cnbc.com/2019/02/20/a-recession-indicator-with-a-perfect-track-record-over-70-years-is-close-to-being-triggered.html https://www.cnbc.com/2019/02/20/a-recession-indicator-with-a... Taken with the yield curve inversion in 2019, and other leading indicators, it appears the US economy is headed for the first recession in over 10 years. If previous trends hold, it's within 12-18 months away. Oddly enough, the stock market typically rallies from the yield curve inversion right into the next recession. So there's money to be made, but it's kind of like trying to gather nickels on the tracks as the locomotive barreling down on you blows its whistle. However, policymakers will continue to tout the relatively low unemployment rate and booming stock market right into the recession (which can only be declared months after its start).

mech1234 7y ago
>The unemployment rate, at 4 percent, is currently 30 basis points from its recent low. Seems like the article is trying really hard to imply that the 50 basic point increase has already occurred, even though it has not occurred.
- dave_b 7y ago
  It’s also an old article, and the unemployment rate has since dropped to new lows. [1] 1: https://data.bls.gov/pdq/SurveyOutputServlet https://data.bls.gov/pdq/SurveyOutputServlet
snarf21 7y ago
Add in the bad monetary policy that has Fortune 500 companies borrowing money at 0% to buyback stocks. Then the Democrats are going to want to rollback the Trump tax cuts and that will be the beginning. However, I think we need a bad recession or pop to bring things back to normal instead of just easing the pressure slightly. Otherwise the real crash will be even bigger.
- ianai 7y ago
  I hope it’s a pop and soon or the eventual fall will be closer to a depression in the old school sense.
  - Nerdfest 7y ago
    Why? That seems like it would cause a lot of very oor people to suffer even more.
    - shagmin 7y ago
      Better a recession now than a depression later.
- NotSammyHagar 7y ago
  The republicans will want to decrease budget deficits, just as soon as a democrat is in office. There's no end to business cycles, a recession will happen again. And we are overdue based on previous cycles. I think we've been juicing the economy for many years so when we have a recession it could be more severe than typical because we've been propping up the economy. We have 0% interest rates in many countries, so the actual economic growth absent that should be much lower. We foolishly had big tax cuts aimed at wealthy people with the trump tax cuts, so when we have a recession and need to counter that with more stimulus spending we'll be facing an increasing budget deficit. if we cancel the billionaire/millionaire trump/republican tax plan it will serve as another negative stimulus on the economy. Just like the us has been reducing the power of its democratic institutions the last few years, we've been borrowing from tomorrow (with unnecessary tax cuts).
- deleted 7y ago
  [deleted]
sangnoir 7y ago
> Oddly enough, the stock market typically rallies from the yield curve inversion right into the next recession. In addition to buybacks, the Fed has been buying treasuries like crazy[1] since September 2019 (they claim it's totally not Quantitative Easing) - so lot's of fed dollars are juicing the stock market rn. 1. $100-billion-per-month worth of "not-QE" https://www.marketwatch.com/story/the-federal-reserve-is-stuck-in-quantitative-easing-hell-2020-01-16 https://www.marketwatch.com/story/the-federal-reserve-is-stu...
ellisv 7y ago
> Taken with the yield curve inversion in 2019, and other leading indicators, it appears the US economy is headed for the first recession in over 10 years. The research using yield curve inversion as a leading indicator of recession is based on the yield curve remaining inverted for a full quarter -- which it didn't do.
tomjen3 7y ago
If it is 12 to 18 months away it will happen just after the election this winter. That will be fun.
- meddlepal 7y ago
  Alternatively timed perfectly to let the Republicans hammer the Democrats if they win all the way until 2024. I'm pretty convinced the Democrats will be toast as a party by 2030 once they get saddled with imploding the economy by no fault of their own other than bad timing.
  - rayiner 7y ago
    > I'm pretty convinced the Democrats will be toast as a party by 2030 once they get saddled with imploding the economy by no fault of their own other than bad timing. The effect of federalizing $3 trillion a year of the economy, raising corporate taxes to far above what Sweden has, and 70% marginal personal tax rates probably won’t be “no fault of their own.”
    - meddlepal 7y ago
      I'm skeptical they'd be able to accomplish even one of those things.
      - xyzzyz 7y ago
        The comment you’re replying to lists all the things that already happened in 20th century, not some kind of scaremongering about the future.
  - jghn 7y ago
    It was right around 10 years ago when headlines were going around saying "Will the GOP ever win again?"
nostromo 7y ago
HN comments are like ZeroHedge -- we've predicted 14 of the past 2 recessions.
- refurb 7y ago
  I'd love to see someone do an analysis of "recession almost here" posts on ZeroHedge over time. There are probably at least one per day for the past decade. My prediction - someone's guess will turn out to be right and they'll be the new investing star for the coming decade.
  - RickJWagner 7y ago
    The very best advice about timing of recessions and recoveries comes from Jack Bogle: "Nobody knows nothing."
riffraff 7y ago
It's not certain that the drop in job openings will _quickly_ turn into loss of jobs, i.e. TFA also says "layoffs rate dipped to 1.1% from 1.2%". Also, the yield curve inversion is a strong indicator, but not a perfect one, and some of the recessions it indicated happened as far as 34 months out (according to some Credit Suisse report I can't really find anymore). We're sure to hit a recession at some point, but it's really hard to guess when.

by aazaa 7y ago

mech1234 7y ago

>The unemployment rate, at 4 percent, is currently 30 basis points from its recent low. Seems like the article is trying really hard to imply that the 50 basic point increase has already occurred, even though it has not occurred.

dave_b 7y ago
It’s also an old article, and the unemployment rate has since dropped to new lows. [1] 1: https://data.bls.gov/pdq/SurveyOutputServlet https://data.bls.gov/pdq/SurveyOutputServlet

snarf21 7y ago

Add in the bad monetary policy that has Fortune 500 companies borrowing money at 0% to buyback stocks. Then the Democrats are going to want to rollback the Trump tax cuts and that will be the beginning. However, I think we need a bad recession or pop to bring things back to normal instead of just easing the pressure slightly. Otherwise the real crash will be even bigger.

ianai 7y ago
I hope it’s a pop and soon or the eventual fall will be closer to a depression in the old school sense.
- Nerdfest 7y ago
  Why? That seems like it would cause a lot of very oor people to suffer even more.
  - shagmin 7y ago
    Better a recession now than a depression later.
NotSammyHagar 7y ago
The republicans will want to decrease budget deficits, just as soon as a democrat is in office. There's no end to business cycles, a recession will happen again. And we are overdue based on previous cycles. I think we've been juicing the economy for many years so when we have a recession it could be more severe than typical because we've been propping up the economy. We have 0% interest rates in many countries, so the actual economic growth absent that should be much lower. We foolishly had big tax cuts aimed at wealthy people with the trump tax cuts, so when we have a recession and need to counter that with more stimulus spending we'll be facing an increasing budget deficit. if we cancel the billionaire/millionaire trump/republican tax plan it will serve as another negative stimulus on the economy. Just like the us has been reducing the power of its democratic institutions the last few years, we've been borrowing from tomorrow (with unnecessary tax cuts).
deleted 7y ago
[deleted]

sangnoir 7y ago

> Oddly enough, the stock market typically rallies from the yield curve inversion right into the next recession. In addition to buybacks, the Fed has been buying treasuries like crazy[1] since September 2019 (they claim it's totally not Quantitative Easing) - so lot's of fed dollars are juicing the stock market rn. 1. $100-billion-per-month worth of "not-QE" https://www.marketwatch.com/story/the-federal-reserve-is-stuck-in-quantitative-easing-hell-2020-01-16 https://www.marketwatch.com/story/the-federal-reserve-is-stu...

ellisv 7y ago

> Taken with the yield curve inversion in 2019, and other leading indicators, it appears the US economy is headed for the first recession in over 10 years. The research using yield curve inversion as a leading indicator of recession is based on the yield curve remaining inverted for a full quarter -- which it didn't do.

tomjen3 7y ago

If it is 12 to 18 months away it will happen just after the election this winter. That will be fun.

meddlepal 7y ago
Alternatively timed perfectly to let the Republicans hammer the Democrats if they win all the way until 2024. I'm pretty convinced the Democrats will be toast as a party by 2030 once they get saddled with imploding the economy by no fault of their own other than bad timing.
- rayiner 7y ago
  > I'm pretty convinced the Democrats will be toast as a party by 2030 once they get saddled with imploding the economy by no fault of their own other than bad timing. The effect of federalizing $3 trillion a year of the economy, raising corporate taxes to far above what Sweden has, and 70% marginal personal tax rates probably won’t be “no fault of their own.”
  - meddlepal 7y ago
    I'm skeptical they'd be able to accomplish even one of those things.
    - xyzzyz 7y ago
      The comment you’re replying to lists all the things that already happened in 20th century, not some kind of scaremongering about the future.
- jghn 7y ago
  It was right around 10 years ago when headlines were going around saying "Will the GOP ever win again?"

nostromo 7y ago

HN comments are like ZeroHedge -- we've predicted 14 of the past 2 recessions.

refurb 7y ago
I'd love to see someone do an analysis of "recession almost here" posts on ZeroHedge over time. There are probably at least one per day for the past decade. My prediction - someone's guess will turn out to be right and they'll be the new investing star for the coming decade.
- RickJWagner 7y ago
  The very best advice about timing of recessions and recoveries comes from Jack Bogle: "Nobody knows nothing."

riffraff 7y ago

It's not certain that the drop in job openings will _quickly_ turn into loss of jobs, i.e. TFA also says "layoffs rate dipped to 1.1% from 1.2%". Also, the yield curve inversion is a strong indicator, but not a perfect one, and some of the recessions it indicated happened as far as 34 months out (according to some Credit Suisse report I can't really find anymore). We're sure to hit a recession at some point, but it's really hard to guess when.