The recovery from the financial crisis is now one of the longest in U.S. history, and economists don’t see it running out of steam anytime soon. But why are they so confident?
The Wall Street Journal conducts a monthly gauge of economist sentiment, asking them to assess the probability of recession in the next 12 months.
Their estimate as of February: only a 12% chance, nearly the lowest recession risk since the recovery began.
They have not always been so confident. In 2011 and 2012, during legislative battles over fiscal policy and while Europe’s debt crisis was flaring up, the odds climbed as high as 33%.
One way economists measure the risk of recession is through leading economic indicators, those gauges that begin to improve more quickly than the overall economy, and—on the downside—flash early warnings of a coming recession.
The Philadelphia Fed compiles one such index that looks at measures like housing permits that signal new construction in the future, initial unemployment claims that signal rising or falling joblessness, delivery times from the Institute of Supply Management manufacturing survey and other measures.
The index is currently going strong, signaling an all-clear for growth in the months ahead.
The Philadelphia Fed breaks its leading indicator predictions down by state, providing an estimate of how the outlook will vary across the country.
For February, they’re predicting expansion will continue in 43 states, with small declines in seven: Alaska, New Mexico, Kansas, Missouri, Kentucky, Alabama and New Jersey.Many economists have their own pet measures to study to see where things are headed.
Michael Feroli, the chief U.S. economist at J.P. Morgan Chase, likes to look at corporate profits. As his chart shows, the pre-tax corporate profit of domestic industries tends to peak in the middle of expansions and deteriorate for at least a few quarters, if not a few years, before the next recession hits.
The measure is currently at its highest level for this expansion, another hint that the recovery has not yet run out of steam.
wsj.com
The Wall Street Journal conducts a monthly gauge of economist sentiment, asking them to assess the probability of recession in the next 12 months.
Their estimate as of February: only a 12% chance, nearly the lowest recession risk since the recovery began.
They have not always been so confident. In 2011 and 2012, during legislative battles over fiscal policy and while Europe’s debt crisis was flaring up, the odds climbed as high as 33%.
One way economists measure the risk of recession is through leading economic indicators, those gauges that begin to improve more quickly than the overall economy, and—on the downside—flash early warnings of a coming recession.
The Philadelphia Fed compiles one such index that looks at measures like housing permits that signal new construction in the future, initial unemployment claims that signal rising or falling joblessness, delivery times from the Institute of Supply Management manufacturing survey and other measures.
The index is currently going strong, signaling an all-clear for growth in the months ahead.
The Philadelphia Fed breaks its leading indicator predictions down by state, providing an estimate of how the outlook will vary across the country.
For February, they’re predicting expansion will continue in 43 states, with small declines in seven: Alaska, New Mexico, Kansas, Missouri, Kentucky, Alabama and New Jersey.Many economists have their own pet measures to study to see where things are headed.
Michael Feroli, the chief U.S. economist at J.P. Morgan Chase, likes to look at corporate profits. As his chart shows, the pre-tax corporate profit of domestic industries tends to peak in the middle of expansions and deteriorate for at least a few quarters, if not a few years, before the next recession hits.
The measure is currently at its highest level for this expansion, another hint that the recovery has not yet run out of steam.
wsj.com
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