Some people think we’re in a recession right now, Some Consider this in the past (we are currently in the second half of 2022).With some new weekly, monthly and quarterly data, do we still think these views are sound? [follow up on this post]?
First, let’s take a look at the quarterly (Q2 GDP Q2 release) and new monthly consumption and income data shows:
figure 1: Nonfarm payrolls (dark blue), Bloomberg consensus as of Aug. 26 (blue+), civilian employment (orange), industrial production (red), 2012 excluding transferred personal income (green), manufacturing and trade sales Ch.2012$ (black), consumption of Ch.2012$ (light blue), monthly GDP of Ch.2012$ (pink), official GDP (blue bars), all log normalized to 2021M11=0. The lilac shading indicates dates associated with the H1 hypothetical recession. Source: BLS, Federal Reserve, BEA, via FRED, IHS Markit (nee Macroeconomic Advisers) (published August 1, 2022), and author’s calculations.
From these data, it is recalled that the NBER Business Cycle Measurement Committee (BCDC) is not highly reliant on quarterly GDP (as many revisions over time can eliminate or cause recessions – see This post about 2001), it does not appear that H1 is declining. (The NBER BCDC now places the most emphasis on employment and income.) The only indicators that are clearly trending downward are sales in the manufacturing and trade sectors, which partly reflect a shift in consumption from goods to services.
Speaking of revisions, it’s important to note that there will be another revision to Q2 GDP ahead of the annual benchmark revision at the end of September. We know from previous work that GDP is better measured in real time using a combination of expenditure-side data (GDP) and income-side data (GDI). What would a 50-50 weight yield BEA reported as Gross Domestic Product (GDO)only available in the second GDP version.
We also know that while the agency survey data is a more precise measure than the household survey data, it is subject to revision, and preliminary benchmark data for March 2022 implies that employment growth is stronger than previously thought.this is in yesterday’s post. Putting together our knowledge of GDO and employment, this is the corresponding graph of Figure 1. .
figure 1: Nonfarm payrolls (dark blue), Bloomberg consensus as of Aug. 26 (blue+), civilian employment (orange), industrial production (red), 2012 excluding transferred personal income (green), manufacturing and trade sales 2012 dollars (black), 2012 dollars (light blue) consumption, 2012 dollars (pink) monthly GDP, official GDP (blue bars), all log normalized to 2021M11=0. The lilac shading indicates dates associated with the H1 hypothetical recession. Source: BLS, Federal Reserve, BEA, via FRED, IHS Markit (nee Macroeconomic Advisers) (published August 1, 2022), and author’s calculations.
Finally, the Lewis-Mertens-Stock weekly economic index for the week ended 8/20 was released yesterday. Through this release, we have obtained the following high-frequency economic picture.
image 3: Lewis-Mertens-Stock Weekly Economic Index (blue), OECD Weekly Tracker (tan), Baumeister-Leiva-Leon-Sims US Weekly Economic Conditions Index plus 2% trend (green) Source: via NY Fed Fred, OECD, Wisioand the authors’ calculations.
If the reading of 2.8 continued throughout the quarter, the WEI reading of 2.8 for the week ended Aug. 20 could be interpreted as a quarterly growth rate of 2.8%. The OECD’s weekly tracking reading of 1.9 translates into an annual growth rate of 1.9% as of August 6. Baumeister et al. The 2.1% reading for the week ended June 25 was interpreted as beating the long-term trend growth rate of 2.1%. The average growth rate of US GDP from 2000-19 was about 2%.
We also measure the geographic distribution of economic activity through July using the Philadelphia Fed’s monthly coincident index released yesterday. The map looks like this:
resource: Philadelphia Fed.
This map, as well as maps from previous months (see here), does not imply a broad geographic recession.
Taking these data into account, our argument for a recession in the first half of the year is further weakened.
