Recession probabilities for the United States obtained from a dynamic-factor markov-switching model applied to four monthly coincident variables: non-farm payroll employment, the index of industrial production, real personal income excluding transfer payments, and real manufacturing and trade sales. For additional details, including an analysis of the performance of this model for dating business cycles in real time, see:
Chauvet,
M. and J. Piger, “A Comparison of the
Real-Time Performance of Business Cycle Dating Methods,” Journal of Business and Economic Statistics,
2008, 26, 42-49.
The probability based recession model has been showing flat-line for years. Even with a slight uptick to 1%, there is little threat of a recession. The slow growth is likely related to the credit cycle and delevering. The new normal is slow growth.
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