Reader Bruce Hall comments<\/a> on this post<\/a> showing the implications of a short horizon probit model of recession likelihood.<\/p>\n Perhaps I didn\u2019t remember correctly, but during the Biden Administration when there were ongoing discussions about whether or not there had been a recession or there was a recession on the way, you had made an observation that it seemed some people were cheering on a recession. My comments was that it seemed some people were doing that now. It wasn\u2019t pointed at you. Sorry if it seemed that way.<\/p>\n<\/blockquote>\n This picture summarizes one reason why I didn\u2019t think a recession was imminent in 2022:<\/p>\n Figure 1:<\/strong> U.Michigan economic sentiment (blue, left scale), 1yr-Fed funds spread, % (brown, right scale). NBER defined peak-to-trough recession dates shaded gray. Conjectured 2022H1 recession dates shaded light green. Source: U.Michigan, Treasury, Fed, NBER, and author\u2019s calculations.<\/em><\/p>\n For the sight impaired, the 1yr-Fed funds spread (highlighted by Miller (2019) as the highest AUROC spread at 1-2 months horizon) was strongly positive, while the March 2025 spread is negative. While the sentiment indicator is higher now than in 2022, but not statistically significantly so (it\u2019s about half a standard deviation difference).<\/p>\n Moreover, in addition to employment growing strongly through 2022H1 (see Figure 1 of this post<\/a>), services consumption (which should be the variable most strongly determined by the Hall-permanent income hypothesis view) was also growing strongly. That\u2019s quite different than in 2025M02.<\/p>\n\n
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