Linda Goldberg and Signe Krogstrup have a revised version of a paper entitled “International Capital Flow Pressures and Global Factors”. They write:
Compiling a bunch of labor market data, we have the following picture of the private nonfarm labor sector, which seems to run counter to the argument last made a month ago that a recession occurred in 2022H1.
Today, we are fortunate to present a guest contribution written by Paweł Skrzypczyński, economist at the National Bank of Poland. The views expressed herein are those of the author and should not be attributed to the National Bank of Poland.
As a share of potential GDP (CBO May 2022 estimates):
Foreign term spreads in several major financial centers have inverted (you can see the yield curves here). What is the probability of a recession 12 months ahead, using the 10yr-3mo term spread, the foreign (Germany, UK, Japan, Canada) 10yr-3mo term spread, and the national Financial Conditions Index (FCI), as suggested by Ahmed and Chinn (2022)? Answer: High
Michael Kiley (FRB) has recently circulated a working paper showing that various indicators have greater predictive power at different horizons. Other papers have shown this for different term spreads, for credit spreads, foreign term spreads; in this case, Kiley shows unemployment and inflation have more predictive power at long horizons than short.