All but one of the U.S. recessions since World War II have been preceded by a dramatic increase
in crude petroleum prices. Recent turbulence in energy markets has some analysts speculating that,
in the immortal words of Yogi Berra, it could be deja vu all over again. But this oil price shock
differs significantly from earlier episodes, leading me to believe that the economy will be able to
adapt to the new pricing environment without a major economic slowdown.
Disappointing job statistics?
The May employment figures
released by the Bureau of Labor Statistics yesterday sent mixed signals, revealing that U.S. job
creation slowed in May even as the unemployment rate edged slightly lower.
What’s up with oil prices?
Oil prices made the third sustained run above $50 that we have seen over the last 9 months. Although the week-to-week price changes have been quite volatile, it appears that long-run factors, particularly strong oil demand from China and other developing counries, is the major story here.
No sign yet of recession
The probability that the U.S. economy is experiencing a new economic recession remains below 5%, according to the latest value of the quarterly real-time GDP-based recession probability index.