Similar Polymarket Q is at 6%. This suggests that this market thinks there is a ~15% chance that a recession will start in Q4?
https://polymarket.com/event/us-recession-in-2024-1

@nic_kup The polymarket question resolves based on two consecutive quarters of negative GDP growth rather than depending on the NBER committee call. Another difference is this market allows for the recession to start in 2024, rather having both Q3 and Q4 fall under some criteria.

Yeah, see also

@PlainBG For the second point: that is what I mean by saying this market believes there is a ~15% chance that a recession will start in Q4 (which i think is too high)

@nic_kup it's 3% if you compare the markets on GDP criteria. The rest of the difference is from the NBER criteria

@jack woah crazy. Should probably read up on that lol

@nic_kup Nice and vague: The committee's view is that while each of the three criteria—depth, diffusion, and duration—needs to be met individually to some degree, extreme conditions revealed by one criterion may partially offset weaker indications from another.

Has the Recession Started? by Emmanuel Saez and Pascal Michaillat.

"With August 2024 data, our indicator is at 0.54pp, so the probability that the US economy is now in recession is 48%. In fact, the recession may have started as early as April 2024."

See also this modified indicator of the modified indicator: https://www.zerohedge.com/economics/key-recession-indicator-gives-stronger-recession-signal-august

I guess you can always tweak the data and build a new indicator concluding whatever you want, but Saez and Michaillat are serious economists and not Zero Hedge permabears so...

Sahm rule: 0.57 with the today' job report ( https://fred.stlouisfed.org/series/SAHMREALTIME ).

Real-time Sahm Rule Recession Indicator

Graph and download economic data for Real-time Sahm Rule Recession Indicator (SAHMREALTIME) from Dec 1959 to Aug 2024 about recession indicators, academic data, and USA.

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Q2 GDP revised higher to 3.0% from the 2.8% advance estimate, beating estimates: https://www.zerohedge.com/markets/q2-gdp-unexpectedly-revised-higher-bizarre-surge-personal-consumption

10Y-2Y is now just above 0 for the first time since July 2022: https://fred.stlouisfed.org/series/T10Y2Y

10Y-3M is still negative and shows no sign of going up: https://fred.stlouisfed.org/series/T10Y3M

U.S. job growth revised down by the most since 2009. Why this time is different

I wonder if someone has ever looked at newspapers headlines and analyzed the frequency of the phrase "this time is different" and the likelihood of an NBER recession in the next 12 months.

Isn't it hilarious how people keep repeating the same mistakes xD. Also, I wonder what the next revision will look like and what the true payroll numbers for the last few months actually are.

Isn't it hilarious how people keep repeating the same mistakes xD

It is!

We're talking about Manifold, right?

Do we know how good prediction markets are at forecasting recessions? Questions I found on Metaculus closed 1y before the target date so it's hard to compare.

Probably just as bad as predicting everything else lol

https://www.conference-board.org/topics/us-leading-indicators/press/us-lei-aug-2024

"“The LEI continues to fall on a month-over-month basis, but the six-month annual growth rate no longer signals recession ahead,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board."

Wdyt @Peregrine

As far as I can tell the LEI has only been constructed and verified from year 2000 onward. While the LEI provides insight into the economic cycle it seems that the choice and weighting of its components are based on heuristics rather than statistical analysis (which is hardly possible for a dataset of only 2 recessions). Furthermore, I can't find statistical justification for the -4.4 % recession threshold for the LEI 6-month ROC. The threshold is only tested for 2 recessions, meaning it is more of a suggestion than anything. What is true however, is that the LEI is still declining. I'm planning on sharing my own leading index where the weighting of components is statistically optimized based on past recessions going back to at least 1970 (as opposed to CBs LEI). This means that many of the components in CBs LEI are not included in my index, since they don't go far enough back.

EDIT: CB LEI does go back further than 2000, but it seems they must have changed the components. For example: even though "avg hours worked, manufacturing" appears as a component om the list, I can't find data for it going back further than 2000.

Made a market for recession in the next 12 months:

https://fortune.com/2024/08/16/black-swan-mark-spitznagel-recession-coming-this-year-bubble-popping-soon

"“This is a run-of-the-mill tightening process, peaking process, inversion process, moving into recession. I’d be surprised if we’re not in recession by the end of the year,” he said."
"Historically, it’s taken nearly a year, on average, after the first inversion of the three-month/10-year yield curve for a recession to begin. But to Spitznagel's point, it has only taken an average of 66 days from when the yield curve disinverts for the economy to crack, Reuters first reported, citing data from Jim Bianco, president and macro strategist at Bianco Research."
"For the outspoken hedge funder, the yield curve’s current disinversion trend is a sign that a recession is coming, and likely within the year. “Is the yield curve distance inversion going to be meaningless this time around? It's never been before,” Spitznagel said. “Is the turn on the employment front gonna be meaningless this time? It never was before.”"
"However, while Spitznagel does fear that a recession is coming, the stock market bubble will soon crack, and stagflation is a long-term risk, he also offered a caveat to his bearish long-term outlook."
"And finally, Spitznagel, who's been bullish since the end of 2022, warned that bubbles tend to end with euphoric highs, and he believes the last leg of our current bubble still has room to run. For investors, that means shorting the market is wrong idea."
""I just want to clear my conscience here," he said. "If your readers short the market, and they have to end up buying back 20% or whatever it is higher, it's not on me. I think a blowoff [to the peak] is coming. It's going to squeeze [bearish investors].""

Please note that he uses the 10Y-3M and not the 10Y-2Y.

10Y-2Y is close to "reverting" above 0: https://fred.stlouisfed.org/series/T10Y2Y
10Y-3M is very far from reversion: https://fred.stlouisfed.org/series/T10Y3M

At this point, can we all agree that last week was a little bit of an overreaction?

It was a fantastic buying opportunity.

I think odds are we are already in one based on Sahm’s rule triggering, retail sales flatlining, yield curve about to uninverts, etc.