San Francisco Fed discards US recession concerns

San Francisco Fed’s Thomas M. Mertens, from the Economic Research Department, published a report, on Tuesday, on the central bank’s official website entitled “Recession Prediction on the Clock”. The report could be seen as a recession predictor based on macroeconomic data, particularly the jobless unemployment rate.

This economic update was able to push the US dollar’s latest corrective bounce amid the holiday-thinned trading week.

Mertens has claimed that this predictor is almost as accurate as the slope of the yield curve but is more accurate at shorter horizons.

According to Mertens, “The smoothed jobless unemployment rate exhibits a predictable pattern throughout the business cycle, typically rising sharply in recessions and gradually declining during expansions”.

Key Quotes

Currently, none of these predictors indicate an upcoming recession over the next two quarters. However, the underlying trend in these macroeconomic time series has started to turn and the predictions might change in the coming months.

The jobless rate does not currently signal an impending recession, nor do other macroeconomic time series analyzed using the same methodology.

In general, however, examining these series suggests that the business cycle is at a maturing stage when expansions typically come to an end.