{"id":272452,"date":"2025-03-16T23:47:52","date_gmt":"2025-03-16T23:47:52","guid":{"rendered":"https:\/\/michigandigitalnews.com\/index.php\/2025\/03\/16\/recession-now-econbrowser\/"},"modified":"2025-06-25T17:09:09","modified_gmt":"2025-06-25T17:09:09","slug":"recession-now-econbrowser","status":"publish","type":"post","link":"https:\/\/michigandigitalnews.com\/index.php\/2025\/03\/16\/recession-now-econbrowser\/","title":{"rendered":"Recession Now? | Econbrowser"},"content":{"rendered":"

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When consumer sentiment drops as precipitously as it has (see here<\/a>), then one has to ask if a recession is in the offing in this month. Here\u2019s I\u2019m using the U Michigan consumer sentiment index to determine if we\u2019re in a recession now<\/em> (i.e., not<\/em> forecasting).<\/p>\n

Here\u2019s Torsten Slok\u2019s graph (among several):<\/p>\n

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Source:<\/strong> Slok\/Apollo.<\/em><\/p>\n

I run a probit regression of a NBER peak-to-trough recession dummy on contemporaneous Michigan sentiment (FRED variable UMCSENT) and the 1yr-Fed funds spread (the last is per Miller (2019)<\/a> who shows this spread has the highest AUROC of spreads at one month horizon).<\/p>\n

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And here\u2019s the estimated recession probability, extended to 2025M03, assuming no recession has occurred as of February 2025.<\/p>\n

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Figure 1:<\/strong> Estimated recession probability using contemporaneous Michigan consumer sentiment and one year Treasury-Fed Funds spread. March spread based on Michigan preliminary reading and yields\/rates through 14 March. NBER defined peak-to-trough recession dates shaded gray. Source: U.Michigan, Treasury, Federal Reserve, NBER and author\u2019s calculations.\u00a0<\/em><\/p>\n

While these estimated probabilities match the recessions pretty well, they indicate a mid-2022 recession (one month). The likelihood for this month is 53% (using the preliminary U.Michigan reading and interest rates through the 14th).<\/p>\n

Still, we don\u2019t have readings for any variable in March. The unemployment rate would have to jump from 4.1% to 4.9% in February in order for the Sahm rule to be triggered (as of February, it reads 0.27 ppts, far below 0.5 ppts).<\/p>\n

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