"Is the US heading for another recession?"
If you hear this question on the news, it's probably too late to do much about it. Today's media does not warn us of future recessions far enough ahead of time to be useful.
Businesses plan their budgets at least six months in advance. They make their plans based on past budget requirements and expected growth, usually calculated using previous trends. If there is an unexpected disruption in these trends, businesses can end up with unsuccessful marketing campaigns, merchandise they can't sell, and debt they can't pay back.
Consumers face the same problems. When a recession hits, medium-term expenses - a new car, an expensive vacation on the credit card - are what we regret the most. How much better off would you have been if you had a clear warning six months before the last recession began?
Predicting recessions with interest rates
We predict US recessions using a simple, powerful model that economists from the Federal Reserve board on down have backed. We use general macroeconomic variables - interest rates - to predict recessions six to twelve months before they begin. Our goal is to give ordinary people reliable information far enough in advance to be useful.
This chart shows the probability of a recession in the next six to twelve months, as estimated by our model. The blue line is the estimated probability, and the grey vertical lines are months when the US was in a recession. If the blue line goes over the red line, the model predicts that a recession is coming.
Looking backwards, our model would have predicted 6 of the last 7 US recessions, including the Great Recession of 2008. Only once would the model have predicted a recession that didn't happen.
Get advance warning when a recession is coming
Enter your email address in the form below and we'll email you when the model predicts a recession. You can also get forecast updates at weekly or monthly intervals. Remember, the model is trying to predict recessions at least six months in advance, so if you get an email, it might not yet be obvious that a recession is coming.
We will not spam you or share your email address.
Everyone benefits from anticipating a recession
Regardless of their immediate cause, recessions are prolonged and deepened by a lack of consumer demand. If everyone began saving a little before a recession started, we'd be able to cut back less once the recession actually hits. Softening the dip in consumer spending would make the recession much shorter and less painful.