The status of the matching indicators

by a New Deal Democrat

In addition to real GDP, which is updated only quarterly and with a lag, the NBER indicated that it relies on four other data points in determining the starting month of a recession: wages, industrial production, real income minus transfer payments, and real production, sales wholesale and retail.

All four are shown below, except that since actual manufacturing and trade sales lag the release of actual retail sales by two months, I’m showing the latter. Since actual retail sales are the largest component of manufacturing and trade sales and generally turn over before the manufacturing and wholesale components, this is still slightly more leading:

Real earnings peaked last November, real retail sales in April, and industrial production may have peaked in September. With gasoline prices falling, real sales and earnings have recovered somewhat since June, but are still below their peaks. Only wages continued to increase throughout the period, and their growth continued to slow.

I suspect the actual recession won’t start until gas prices bottom out; and we probably won’t know about wages at least until the annual revisions start next March. But with the Fed raising rates by another 0.50% on Wednesday, my best guess is that there’s a 95% chance we’ll be in recession by mid-2023. 

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