Recession Anxieties, June 2019

Different forward looking models show increasing likelihood of a recession. Most recent readings of key series highlighted by the NBER’s Business Cycle Dating Committee (BCDC) suggest a peak, although the critical indicator — nonfarm payroll employment — continues to rise, albeit slowly.

Predictions from Financial Markets

Figure 1: Probability of recession in indicated month, based on spreads 12 months prior, from 10yr-3mo term spread (blue), 10yr-3mo term spread and Moody’s Baa-10yr credit spread (red), 10yr-3mo term spread adjusted by ACM 10yr term premium (teal), and 10yr-3mo term spread and ACM 10yr term premium (black). Probit regressions estimated on monthly data over 1986-2019M05 data. NBER defined recession dates shaded gray. Source: FRED data (including NY Fed via FRED), NBER, and author’s calculations.

It’s definitely true that the premium adjusted term spread predicts a very low probability (teal line); however using a 33% threshold, that model would have missed completely the 2007-09 recession (i.e., false negative). Of course, using the 50% threshold no recession is imminent.

Note that using a 33% threshold and the simple term spread model (blue line) would suggest a recession in 2020, while not sending a false positive for late 1999. The term and credit spread model (red line), while fitting well, would’ve provided a false positive for late 1999 using that same 33% threshold. (A good recent survey and evaluation of competing spreada models is provided by David Miller in FEDS Notes.)

Conjunctural Aspects

What about the indicators the NBER BCDC follows?

Figure 2: Nonfarm payroll employment (blue), industrial production (red), personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), and monthly GDP in Ch.2012$ (pink bold), all log normalized to 2019M01=0.  Source: BLS, Federal Reserve, BEA, via FRED, Macroeconomic Advisers (5/30 release), and author’s calculations.

Nowcasts extending out to 2019Q3 all suggest a slowdown (as indicated in flattening trajectories in GDP in Figure 3), but not necessarily a recession (no negative entries in Figure 4).

 

Figure 3: GDP in bn.Ch.2012$ SAAR as reported in second release (black), Macroeconomic Advisers of 6/6/2019 (blue), NY Fed Nowcast of 6/7/2019 (red), and Atlanta Fed of 6/6/2019 (teal). Source: BEA, NY Fed, Atlanta Fed, Macroeconomic Advisers, and author’s calculations.

Figure 4: Annualized quarter on quarter growth rate of real GDP as reported in second release (black), Macroeconomic Advisers of 6/6/2019 (blue), NY Fed Nowcast of 6/7/2019 (red), and Atlanta Fed of 6/6/2019 (teal). All calculated using log differences. Source: BEA, NY Fed, Atlanta Fed, Macroeconomic Advisers, and author’s calculations.

Expectations/Uncertainty Sensitive Components of Aggregate Demand

All economic activity depends on expectations of future variables — including asset prices, which is why the expectations hypothesis of the term structure is useful. However, some components of aggregate demand are more sensitive to expectations — both mean, variance, and uncertainty — than others. Investment — particularly equipment — is an obvious example; so too is housing investment.

Figure 5: Equipment investment (dark blue), and capital goods imports excluding aircraft and computers (red), four quarter change  as log ratio to GDP, all in 2012Ch.$. NBER defined recession dates shaded gray. Light orange denotes Trump administration. Orange denotes TCJA in effect for equipment. Source: BEA 2019Q1 2nd release, NBER, and author’s calculations.

Equipment investment is now flat y/y. Imports of capital goods aside from computers and aircraft and aircraft parts are now decreasing, although it’s hard to say how much of this is due to tariffs. While both series predict recessions (McFadden Rsquared equal to 0.36), the implied recession probability is only about 5% in one year (see this post).

Figure 6: Investment in single family residential housing, in bn.Ch.2012$ SAAR (blue, left log scale), and Case-Shiller 20 city house price index, deflated by CPI-All (red, right log scale). NBER defined recession dates shaded gray. Light orange denotes Trump administration. Orange denotes TCJA in effect for investment. Source: BEA 2019Q1 2nd release, S&P and BLS via FRED, NBER, and author’s calculations.

What about Leamer’s thesis of the business cycle as housing cycle? In the last recession, investment and real house prices peaked about two years before the onset of the recession. Real investment peaked in 2018Q1. Real housing prices, on the other hand, have not yet peaked.

The Case-Shiller indices only go up through March. Looking at the monthly Zillow price indices, which extend through April, one can see an apparent peak: March for nominal, February for real.

Figure 7: Zillow median single family house price, in $ (blue), and in 2018$ (red). Real calculated using CPI-All. Source: Zillow, BLS via FRED, NBER, and author’s calculations. 

Moreover, in the top 12 home markets, 11 are experiencing decreasing prices from March to April (the largest — New York city — is flat).

Interestingly, the Zillow index (which differs from the Case-Shiller, see discussion here) peaks one year before the recession. If we get a repeat performance, the recession begins in February 2020.

61 thoughts on “Recession Anxieties, June 2019

  1. Jake formerly of the LP

    The phrase that comes to my mind is “This may not be the end of the expansion. But you can see it from here.” The subpar jobs report and downward revisions is only the latest number, and declining private sector construction and significant declines in both exports and imports is worth keeping an eye on.

    Reply
  2. pgl

    So a group in this Federal government wants to tell the truth about a key policy issue – this time being climate change – and Trump does all he can to block government employees from telling the truth:

    https://talkingpointsmemo.com/news/white-house-climate-change-intelligence-agency

    WH Bars Intel Agency From Testifying That Climate Change Is ‘Possibly Catastrophic’

    the administration blocked the testimony wholesale after State Department officials refused to remove references to climate change. The officials reportedly said that the climate change findings in the testimony, coming from government research, did not match the administration’s official stance and thus were inadmissible. Trump has consistently denied his own government’s dire warnings about the state of the planet. “I believe that there’s a change in weather, and I think it changes both ways,” Trump said in an interview with Piers Morgans. “Don’t forget, it used to be called global warming. That wasn’t working. Then it was called climate change. Now it’s actually called extreme weather, because with extreme weather, you can’t miss.”

    Once again – Trump is babbling such nonsense that even his idiocy makes CoRev look good by comparison. But let’s get this straight – if one writes some incredibly dishonest BS that matches Trump’s utter stupidity – that gets reported. But if one writes the truth – it cannot be reported if embarrasses our Idiot-Chief?! OK!

    Reply
    1. CoRev

      Pgl in his infinite wisdom thinks there is a treasure trove of climate science contained in “The White House blocked a State Department intelligence agency from submitting testimony to the House Intel Committee stating that climate change is? “possibly catastrophic.”” And the best this unknown group van come up with is “possibly catastrophic.”.

      At the same time the Nat. Park /Service was removing signs that said the glaciers of glacier national Park would disappear by 2020. I wonder what gl’s special unknown group would say about the glaciers “possibly” still disappearing in the next 6 months.

      Maybe if we implement the Green New Deal quickly enough we can save those ole glaciers. Oh wait. Those glaciers are growing instead of shrinking as is one Greenland’s largest glaciers.

      Reply
      1. pgl

        Trump got nothing from Mexico:
        https://talkingpointsmemo.com/news/deal-mexico-tariffs-border-immigration
        “Turns Out That The Bulk Of The Deal With Mexico Was Agreed To Ages Before Tariff Threat

        Most of the concessions that President Donald Trump extracted from Mexico in exchange for withholding his threatened tariffs were offered months before the most recent showdown, according to the New York Times.”

        So Trump throws a hissy fit over incredibly stupid tariffs so he can claim later he got a great deal on the immigration deal but the deal he got was already agreed to before his hissy fit? Now Trump is claiming success? OK, we get Trump lies about everything.

        Of course CoRev is praising Trump over this. Oh well – we have known CoRev is a gullible fool for a very long time!

        Reply
      2. pgl

        Hey – CoRev serves up Word Salad for dinner. Look CoRev – we get you are the most incompetent troll ever but could you at least TRY to write a coherent and relevant comment at least once in your life?

        Reply
        1. Hans

          PGL, whom is trolling whom? This thread is about housing prices and
          a possible recession and you entertain us with a World Salad of AGW and
          western-hemispheric tariffs ?

          “According to the 2019 Zillow Home Price Expectations Survey released June 5, 50% of the surveyed economists, investment strategists and housing market analysts believe the next recession will begin in 2020, with 19% predicting it will begin in the third quarter.

          Experts surveyed point to trade policy as the most likely cause of the next recession, followed by a stock market correction and geopolitical crisis – all of which would be a far cry from the lax lending policies and financial liquidity issues that contributed to the Great Recession.”

          I would suggest the nexus of declining home prices and recessions
          are very weak. Moreover, the use of a single index or factor as a
          predictor is more than often incorrect.

          Reply
          1. pgl

            “This thread is about housing prices and a possible recession and you entertain us with a World Salad of AGW and western-hemispheric tariffs ?”

            Ah Hans – maybe you cannot follow a discussion but it was CoRev who gave us the word salad about how Trump’s tariffs were wonderful. Now if he wants to entertain us with his views on housing prices – I’ll sit back and enjoy!

      3. The Jack

        About ten years ago I obsessively followed a number of econ blogs such as this one, angrybear, Mark Thoma and a few others. I fell out of the habit some time ago, but a link shared by a friend brought me here.

        You two were at each others’ throats constantly back then. It is charmingly surprising to see that a decade later that hasn’t changed a bit. Good luck and godspeed to you both.

        Reply
          1. pgl

            LOL! Jack wrote sensible comments. For this he should be banned? Wow – the reign of Trump has turned every thing upside down!

          2. The Jack

            I got tired of the BS, but perhaps not in the way you mean. I am not an economist, but I feel it is an important pursuit and vital for people to understand. I began reading econ blogs in the early 2000’s and kept up the habit for several years hoping to understand the topic better. It worked to a point, but after a while it just seemed like the same arguments from the same people. I began to question if anyone, even academic economists, had any idea what was actually going on. I wasn’t interested in delving into econometrics deep enough to evaluate the issues myself to form an educated opinion, particularly since the models don’t seem to map well onto the territory in many cases. So I moved on to other topics of interest.

      4. Moses Herzog

        @ CoRev
        I know this is a big challenge for you, but could you provide a supporting link for your claims?? The “IPAA” doesn’t count.

        Reply
          1. CoRev

            .Pgl IPAA?? What has that article to do with anything I provided, in particular the Glacier National Park signs?

            Your NPS reference is just as bad, with zero relevance and no reference to glaciers, Glacier Natinal Pzark nor the prediction that the GNP glaciers would disappear by 2020.

            Are you so dense to misunderstand everything written?

      5. pgl

        CoRev just makes garbage up as he is not allowed by his master (Trump) to report the truth. I went to the National Park Service to see what they had to say and their web site directed me here:

        https://www.usgs.gov/centers/norock/science/climate-change-mountain-ecosystems-ccme?qt-science_center_objects=0#qt-science_center_objects

        “Climate change is widely acknowledged to be having a profound effect on the biosphere with many and diverse impacts on global resources. Mountain ecosystems in the western U.S. and the Northern Rockies in particular are highly sensitive to climate change. In fact, the higher elevations of the Northern Rockies have experienced three times the global average temperature increase over the past century. These same ecosystems provide up to 85% of the water humans depend on as well as a host of other ecosystem services such as snow-based recreation, timber, unique flora and fauna, and critical habitat for rare and endangered species such as bull trout and grizzly bear. Climate change poses special problems for mountain protected areas, such as national parks and wilderness areas, because most of the land area within their boundaries is at higher elevations. The Northern Rocky Mountain Science Center has been monitoring, conducting research, and modeling ecosystem responses to climatic variability since 1991, first at Glacier National Park but eventually throughout the western U.S. and worldwide in collaboration with other scientists.”

        This directly contradicts the intellectual garbage CoRev routinely spews. And yet this troll has us to believe that the National Park Service supports his warped views? OK – maybe CoRev is not a blatant liar. Maybe he is just the dumbest troll ever.

        Reply
      6. Barkley Rosser

        “Unknown,” CoRev? Maybe to you. It is small and does not have an operations arm, but historically State Dept Intelligence and Research (I&R) has had the best forecasting and analysis track record of all of the the officially admitted 17 US intel agencies. One thing they do others such as CIA and DIA do not do is that they let people stay at a desk and get to the know the countries and areas they study. At the other agencies they move people around so that they do not “go o native,” but the upshot is that often they do not know much and are more susceptible to dumb party lines coming down from administrations.

        At least this is how it used to be.

        Reply
        1. CoRev

          Barkley, do you also not understand that Dept of State is not a cent4er of excellence for Climate Science? State is also susceptible to “go o native,” by not being moved. Sympathetic versus objective analysis is not a good thing in the intelligence world.

          At least this is how it used to be.

          Reply
          1. Menzie Chinn Post author

            CoRev: Have you ever worked at State? Have you ever worked with individuals at State? Have you even ever been in the State Department building? What makes you such an authority on State? Just curious.

          2. Barkley Rosser

            CoRev,

            This particular individual seems to have a solid scientific background and record. One rarely hears about I&R because they rarely mess up, and only long after the fact is its record of calling things other agencies fail to vall get publicized, but not ever front page reporting. Easy for somebody like you to miss.

            Yes, I do know people have and do work there.

          3. CoRev

            Menzie, no, yes, yes, not an authority on /state but more knowledgeable than most here on climate science.

        2. 2slugbaits

          Barkley Rosser I have family members in the diplomatic service. Current State Dept policies move folks around and they don’t spend as much time in a single country as you probably remember. Still, they do tend to encourage people to develop specific skills and contacts within a certain region. In the case of one of my in-laws, he spent several years each in Bangladesh, Pakistan (during 9/11…he was portrayed in the movie about WSJ reporter Daniel Pearl’s killing), India and Afghanistan. Of course, the personnel situation over at Foggy Bottom is a mess right now with a flood of recent resignations and early retirements. Part of the problem is that many of Trump’s ambassadors who are not career foreign service believe that they were selected because of their expertise, so they end up dismissing or disregarding their deputies and senior folks. In the past the ambassadors who held down political appointments always understood that they weren’t supposed to do anything except go to dinners. But Trump’s clowns actually think they’re supposed to get involved in professional State Dept business. All they are supposed to do is have lunch and drink cocktails with other ambassadors. My understanding is that CIA types tend to hang with less politically visible actors while State tends to focus on high profile actors.

          BTW, my sister told me that at the palace Pakistan strong man Pervez Musharraf had “to die for” liquor & wine cellar along with a world class collection of rate cigars in his humidor. Not exactly Muslim approved.

          Reply
          1. Barkley Rosser

            2Slug,

            I am talking about I&R, not regular State Dept people. Yes, the latter get moved around more.

      7. 2slugbaits

        CoRev Those glaciers are growing instead of shrinking as is one Greenland’s largest glaciers.

        Your phrasing is a bit awkward, but I assume you are pointing out that some glaciers in Greenland are growing and you didn’t intend to say Greenland’s glaciers are shrinking. Technically it’s true that Greenland’s glaciers are growing…but that’s because they are melting faster than expected and the melt has the effect of expanding the area covered by the glaciers even though the volume of ice is shrinking. So a “growing” glacier in this case is a bad news story, not a good news story.
        https://www.nationalgeographic.com/environment/2019/03/one-part-of-greenland-ice-growing/

        Reply
        1. CoRev

          2slugs, talking about awkward phrasing: “Technically it’s true that Greenland’s glaciers are growing…but that’s because they are melting faster than expected and the melt has the effect of expanding the area covered by the glaciers even though the volume of ice is shrinking. So a “growing” glacier in this case is a bad news story, not a good news story.” So which is it? Growing or shrinking? Plus, I only referenced 1 of Greenland’s largest glaciers, not all, and your article referenced that glacier.

          What amazes is your ignorance (as well as that of your fellow believers) in that you totally ignored this in your article: “This influx of cold waters isn’t an isolated event: Thanks to a natural cycle in the Atlantic Ocean that switches back and forth between warm and cold about once every 20 years, cooler waters are penetrating far up the western coast of Greenland. But the phase will switch again at some point and warmer waters will return.”

          Why did I point this out? For years we skeptics have making this point about the change about to happen with this very same oscillation, the AMO as well as the Pacific’s version, the PDO. Remember all those claims about the ice free Arctic? Well its volume, for the ignoranti that’s multi-year ice, has been growing for several years now. The Greenland glaciers are following the same pattern as Iceland’s https://icelandmag.is/article/icelandic-glaciers-expand-first-time-over-20-years.

          Why? Because the AMO has shifted from its warm to its cold phase. AND THIS SHOULD CONTINUE FOR THE NEXT COUPLE TO FEW DECADES. ALL WHILE THE ATMOSPHERIC CO2 INCREASES.

          To compound the AMO and then PDO shifts we are in a solar minimum, which some have predicted was the cause of the LIA. Cold climate kills and warm climate actually enhances human and bio growth. That little fact is ignored by those who believe in the CO2 god as the driver of climate change. And that’s sad, because it adds to the death count of liberal movements.

          Reply
          1. 2slugbaits

            CoRev Please learn the difference between cycles and trends. Maybe learn a little bit about unobserved components models.

            The “growing glacier” is only growing at the edges. The volume of ice is decreasing even though the area of ice coverage is temporarily growing. Maybe learn a little middle school geometry as well.

          2. Menzie Chinn Post author

            2slugbaits: Give it up. CoRev has no interest in learning anything that challenges his pre-ordained views on the world. Calculation of volumes would be one of those things, as far as I can tell from his commentary.

          3. 2slugbaits

            Menzie You have a point. I remember how CoRev used to insist that since sea level was rising at a constant rate this proved that glacial ice wasn’t melting at a faster rate. Apparently he never figured out how to compute the volume of a sphere.

          4. CoRev

            2slugs, cycles happen in weather and therefore in climate. One such cycle, the PDO, just referenced here:

            Let me repeat the definition: “Climate oscillation
            A climate oscillation or climate cycle is any recurring cyclical oscillation within global or regional climate, and is a type of climate pattern. These fluctuations in atmospheric temperature, sea surface temperature, precipitation or other parameters can be quasi-periodic, often occurring on inter-annual, multi-annual, decadal, multidecadal, century-wide, millennial or longer timescales.”

            A trend is: “a general direction in which something is developing or changing.”

            I recommend you study the differences closely. Read some of the Climate books, to learn the differences.

            “The “growing glacier” is only growing at the edges.” Totally wrong! Glaciers grow by accumulating snow, which then adds pressure for the glacier move lower, accumulating snow ADDS VOLUME. Coastal glaciers lose volume by both melting and calving. Sometimes the losses occur faster than the snow accumulates. Growing glaciers will calve as its face moves further from its sea bottom grounding. sometimes this will occur faster than the snow accumulates.

            The GNP glaciers growth is due to faster accumulating snow than the melt. There is no sea with which to calve.

            So you are mostly wrong when you proclaim: “The “growing glacier” is only growing at the edges. The volume of ice is decreasing even though the area of ice coverage is temporarily growing. ”

            You and Menzie should learn some basic natural science. You might then know the difference between science and religious belief., and of course the difference between trends and cycles/oscillations. Then using “unobserved components models” would be unnecessary as you could recognize the components and their effects versus a magical molecule of CO2.

      8. 2slugbaits

        CoRev The 2020 prediction was based on some old 1990s technology. And it seems like you’re the one who is confusing weather and climate. The fact that some of the glaciers at Glacier National Park are increasing is a due to particular weather events. In other words, just random year-over-year stuff. From a longer run climate perspective there isn’t any question that the glaciers at GNP are disappearing. In 1850 there were 150 glaciers at GNP. By 1968 that number had fallen to 50 and by 2009 that number had fallen to 26. And since the Obama Administration put up those warning signs, one of those 26 glaciers has disappeared because there are now only 25 glaciers at GNP.

        As to the Greenland glacier, yes one of them is growing; however, it’s still true that the Greenland ice sheet is shrinking faster than one of its glaciers is growing. And the one that is growing at the edges (and ONLY at the edges) is doing so because of temporarily cold surrounding water from cyclical ocean currents. That’s a special case that happens to be peculiar to that one glacier and is only a temporary aberration. So once again you are confusing one-off weather events with climate change. Greenland’s shrinking ice sheet is a climate change phenomenon. The fact that the Jakobshavn Glacier is growing is a weather phenomenon.

        Reply
  3. AS

    The data presented seem to hint strongly at an impending recession. However, trying to find some evidence of optimism, and building upon Professor Chinn’s comment “…although the critical indicator — nonfarm payroll employment — continues to rise, albeit slowly,” I looked back at Professor Hamilton’s post from 8/13/2016. In the post titled, “Why you should never use the Hodrick-Prescott filter,” he presents a cyclical analysis of nonfarm payroll employment (PAYEMS FRED series). He notes, “One interesting observation is that the cyclical component of employment starts to decline significantly before the NBER business cycle peak for essentially every recession.” Updating the cyclical data to the end of 2019 Q2, the cyclical component has not yet started a significant decline. I forecasted 2019m6 PAYEMS at 151,249,000.

    Reply
      1. AS

        Thank you for asking. No, I don’t have a blog. I am just a hobbyist, who enjoys economic topics and forecasting. I started my professional career as a CPA with one of the “big eight” many years ago and moved-on to management positions in the health care industry and teaching accounting in retirement.

        Reply
  4. Moses Herzog

    WSJ says “You’re doing a heckuva job Trumpy”.
    https://www.wsj.com/articles/a-jobs-warning-for-trump-11559945631?mod=hp_opin_pos2

    Immediately after the above WSJ editorial was posted 3 editorial board members at WSJ were charged with drug dealing by U.S. Attorney General William Barr. MAGA wins again!!!!!! WSJ weak losers!!!!!
    https://www.bbc.com/news/world-europe-48566028

    Well, I forgot, donald trump is like Nancy Pelosi, he’s a very “strong” leader. Very very “strong” leader. AG William Barr wipes trump’s heinie with “Brown Noser” brand toilet paper at least 3 times a day, and AG William Barr says he’s impressed with donald trump’s thigh strength when he helps lift him off the toilet. If the constipation on any particular day is worse than normal and donald needs encouragement Barr is said to often kiss trump on the cheek and ask “Do I remind you of Stormy Daniels??” Not that there’s anything wrong with that……..

    Reply
    1. Hans

      The Onion or Vox could use your satirical talent, Moses.

      Any comments about the current subject at hand?

      Reply
        1. noneconomist

          CoRev has no clue what he’s peddling. He just peddles.
          (BTW, my local water district–governed by mostly conservative Republicans–has been planning for climate change for, oh, more than a decade. They’re sometimes at odds with customers on how to achieve those goals, but they do have goals related to climate change they’re trying to achieve)

          Reply
          1. CoRev

            Noneconomist: “my local water district–governed by mostly conservative Republicans–has been planning for climate change for, oh, more than a decade. ” What an insane claim. What would you have your “local water district” do? NOT PLAN FOR CHANGE???? You do know, of course, that a 10 year period is seldom considered climate but weather.

            BTW, are they planning to control excess or lack of water? Just wondering.

          2. Menzie Chinn Post author

            CoRev: “seldom”? Please provide documentation. In contrast, I look at what NASA states:

            What Weather Means
            Weather is basically the way the atmosphere is behaving, mainly with respect to its effects upon life and human activities. The difference between weather and climate is that weather consists of the short-term (minutes to months) changes in the atmosphere. Most people think of weather in terms of temperature, humidity, precipitation, cloudiness, brightness, visibility, wind, and atmospheric pressure, as in high and low pressure.

            In most places, weather can change from minute-to-minute, hour-to-hour, day-to-day, and season-to-season. Climate, however, is the average of weather over time and space. An easy way to remember the difference is that climate is what you expect, like a very hot summer, and weather is what you get, like a hot day with pop-up thunderstorms.

            Please feel free to cite WattsUpWithThat, or some similar disinformation site; we’ll ignore it.

          3. noneconomist

            CoRev again shoots from hip, injures lip, and, of course, has no idea what he’s talking about. Only makes sense that elected officials of a water district in California would be concerned about diminishing water supplies. (Yes, I’m aware the President insisted there was no drought, and that too much water was heading to the ocean, rather than uphill as God intended. If that’s your opinion, no surprise.)
            However, for AT LEAST a decade local officials–buoyed by studies pointing to LOWER snow levels at LOWER elevations–have attempted to address future concerns re: sufficient water for larger population(s). What to do? Build an additional reservoir (cost estimated between $300 to $500 million), expand current reservoirs, expand mountain conservation efforts on numerous fronts, etc.
            More to the point: even climate change skeptics–including those conservatives who may inhabit district boards–must pay attention to the concerns of their hydrologists and engineers–and district residents and customers– who rely on data to point the way forward.
            But please. continue being clueless. I expect nothing else.

          4. CoRev

            Menzie you are beginning to amaze as much as pgl. I said: “You do know, of course, that a 10 year period is seldom considered climate but weather. ” and your reference confirmed it with :…The difference between weather and climate is that weather consists of the short-term (minutes to months) changes in the atmosphere….”

            Wiki’s definition parallels the IPCC AR4 definition: “Climate is defined as the average state of every day’s weather condition over a period of 30 years. It is measured by assessing the patterns of variation in temperature, humidity, atmospheric pressure, wind, precipitation, atmospheric particle count and other meteorological variables in a given region over long periods of time. Climate differs from weather,…” The IPCC SRES softened the 30 years to multiple DECADES.

            I specifically used “seldom” because even 30 years is often considered too short to collect data for some of the multiple climate cycles and cyclical climate drivers.
            “A climate oscillation or climate cycle is any recurring cyclical oscillation within global or regional climate, and is a type of climate pattern. These fluctuations in atmospheric temperature, sea surface temperature, precipitation or other parameters can be quasi-periodic, often occurring on inter-annual, multi-annual, decadal, multidecadal, century-wide, millennial or longer timescales. They are not perfectly periodic and a Fourier analysis of the data does not give a sharp spectrum. …”
            Few climate catastrophists understand nor admit to these well known cycles, because they do not support the claims of unprecedented (what ever the metric or event) and immediacy of the need

            I typically cite seasons for a short term and the glaciations for long term examples of these cycles/oscillations..

            It is common to intermix weather and climate, and even 10 years of weather is SELDOM considered climate, but extended weather patterns, cold, dry or hot spells.

            Please stick to economics or better read some Pielke’s (Jr & Sr), Spencer’s, Curry’s or Lindzen’s books. I know they’re skeptics, but it’s science and not religion. Isn’t it?

          5. CoRev

            Noneconomist, you’re raving in generalities. Did you have something specific which to point out where i was wrong?

            I’ll repeat: “What an insane claim. What would you have your “local water district” do? NOT PLAN FOR CHANGE????” I didn’t know nor care to where you were referring. Any water district not planning for/on change should be disbanded. It doesn’t matter whether water is plentiful or scarce, it’s use and supply changes.

          6. Barkley Rosser

            CoRev,

            The original issue on this climate debate had to do with you objecting to pgl complaining about the unprecedented move by Trump and Pompeo to block a State Dept I&R employee from testifying before Congress on issues related to climate change, eventually getting off into your weird blather about the time scale of climate versus weather after dismissing I&R as an “unknown” agency, even though you claim to have been in Foggy Bottom and known people from there. That no previous president has done such a thing to block discussions of widely accepted science does not bother you.

            I do not know what this person was going to say, but something that both entities at DOD as well as State are worrying about is how climate change may affect future relations between the US and other nations, especially if the more extreme outcomes of the IPCC projections come to pass. So we know that if global warming proceeds, it will negatively impact certain nations in ways that may damage their economies and societies and make them more likely to either fall apart or engage in hostile relations with other nations, matters of concern for both US diplomacy and national security. An example we may have already seen is that it has been argued that a factor in the ferocity of the war in Syria has been extreme droughts going on there recently. Projections of such possibilities would seem to be a very appropriate matter to testify to Congress about.

          7. Barkley Rosser

            On the matter of the Bureau of Intelligence and Research, sometimes called “INR,” two examples of it being far better in its analysis than any of the other intel agencies, certainly including CIA and DIA, are the Vietnam War and the invasion of Iraq. They may be the smallest of the US intel agencies, but they have been one of the best, if not the best, at least for analysis, which is all they do.

            And to 2slug, they do not (generally) have operations officers i nembassies. What goes on in those is regular diplomats competing with the CIA implants (and occasionally folks from other intel agencies, such as DIA as well).

  5. Moses Herzog

    Don’t look now kids, some Hong Kong citizens, who tend to be, uuuuuuuuuuuuuuhh….. more “well-rounded” than mainlanders, (see what I did there Menzie??) have FINALLY decided they’re tired of being trodden on by Beijing bureaucrats. Of course their “cognitive dissonance” (see how I pulled that off Menzie??) preempts them from seeing they lost this battle circa 1997 (one could argue 2010, but who are we trying to placate here?? The taxi driver with the Mao rear mirror trinket??). But it’s so cute, isn’t it?? I haven’t seen anything this adorably infantile since toothless teabaggers with misspelled protest signs were marching to stop the federal government from getting involved in their Medicare.
    https://www.bloomberg.com/news/articles/2019-06-08/thousands-to-protest-hong-kong-law-easing-extraditions-to-china?srnd=premium

    The PSB will throw out a couple of tear gas canisters, beat the crap out of 2 twelve year old girls, 1 grandma, and 5 oversexed male university students and they’ll all go frantically running back to their apartment complexes saying “Oh well, we took it to the man, didn’t we???”

    [ Happy sigh ] Good times……..
    https://chinahao.com/product/545914567593/

    Reply
  6. Hans

    “I just provided a link to FEDS Note https://www.federalreserve.gov/econres/notes/feds-notes/there-is-no-single-best-predictor-of-recessions-20190521.htm ; is there some document to buttress your claim?”

    Thank you, Professor Chinn, for the link. Refreshing to read a frank opinion
    from the FRB. May I use your link to support and buttress my claim? I and others
    have back tested a variety of single indexes and all failed at one point or another.

    The economy is simple too complex for single index or even a multitude of indexes
    to project a forthcoming recession, with any high degree of accuracy. And of course
    more often than not, it is done belatedly as a statistical note, with those effected
    already suffering the pain of an economic slowdown.

    That being said, credit and bond spreads do bear watching.

    Reply
    1. Menzie Chinn Post author

      Hans: Did you even read the Note? If you did, you will note the AUROC indicates a single best indicator at 2 month horizon, maybe multiple at 12 months, and two indicators (10y-2y & EBP) at long horizon. As a test for you, can you tell me what you comprehended from the Note is that best indicator at 20 months? I await with anticipation your response.

      Reply
      1. Moses Herzog

        [ Looks over at Hans from his classroom desk and waves hand violently in the air, hollering like the class rube ] “I think I know!!” “Me!!” “Me!!!” “Professor Chinn over here!!! I think I know!!!!”

        Reply
      2. Moses Herzog

        The most accurate predictor depends on the AUROC sample used?? The “principal components model” is the most accurate predictor of recessions at all horizons between 6 and 20 months.

        Menzie, even if it is an “easy” question by your graduate students’ level standards, I’m desperate for recognition and positive reinforcement, please tell me I at least get a B minus on the quiz??
        https://www.youtube.com/watch?v=hjtEhFSN6LM

        Reply
          1. Moses Herzog

            : ) Thanks. It actually does boost my mood on multiple levels, mainly having it confirmed.

  7. Julian Silk

    Dear Folks,

    I just have a question. I appreciate that Menzie has came to worry about a recession, with all these indicators. Because of the policy uncertainty around tariffs, there could easily be an increase in inflation, a recession or both. But if the signs are so serious, why aren’t the small businesses worrying about it? My indicator is at

    https://www.calculatedriskblog.com/2019/06/small-business-optimism-index-increased.html

    and it would seem to be in their interest, more so than the economists or the commentators, to know.

    Julian

    Reply
    1. Menzie Chinn Post author

      Julian Silk: My guess by eyeballing NFIB small business optimism is it would be a lousy predictor (in a probit regression). I don’t have full sample, but look at pattern before 2001 recession and before 2007 recession (oblivious, in first case, long down-trending before in latter).

      Reply
  8. Julian Silk

    Dear Menzie,

    I’m not going to argue with you on that; you are probably right even with the full sample. But doesn’t it seem strange that this is the case?

    Julian

    Reply

Leave a Reply

Your email address will not be published.