The St. Louis Fed (ht, Barry Ritholzt) has decided that the Great Recession is over. Here's Barry—
For several months, I had been getting increasingly curious about the fact that the St. Louis Fed’s FRED data and economic research service was no longer indicating a vertical “recession bar” from the period starting around mid-year 2009. Finally, today, curiousity got the best of me and I called my St. Louis Fed contact. This was his response (confirming what I’d already inferred):
Apparently the two staff economists that review the FRED charts believe July 2009 is the date they believe the NBER will announce as the end of the recession. From what I understand a similar “call” was made toward the end of the 1990-91 recession.
If I was to highlight one source they used it would be Jeremy Piger’s (University of Oregon), recession probabilities. He was a staff economist until about 4-5 years ago.
I’m not entirely sure I agree with their assessment, but do think it noteworthy that one of our Federal Reserve banks has apparently “called” a July 2009 end to the recession. I should have inquired on this point sooner, but life got in the way.
Check it out. The gray recession bar stops short of 2010.
Figure 1 — Real Gross Domestic Product (GDP) from FRED
A few hundred miles away, the Chicago Fed's National Activity Index (3-month moving average CFNAI-MA3) shows nothing of the sort. Here's the index with the relevant info in the caption.
Figure 2 — When the CFNAI-MA3 value moves below –0.70 following a period of economic expansion, there is an increasing likelihood that a recession has begun.
So, the index remains below -0.70. However—
The index’s three-month moving average, CFNAI-MA3, increased to –0.77 in November from –0.87 in October. November’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend. The level of activity, however, remained in a range that has historically been consistent with the early stages of a recovery following a recession. With regard to inflation, the amount of economic slack reflected in the CFNAI-MA3 indicates low inflationary pressure from economic activity over the coming year.
"Consistent with the early stages of a recovery" does not mean a recovery is underway. Needless to say, the NBER, which is responsible for such things, has not called the end of the Great Recession.
I guess the philosophy over at the St. Louis Fed is if you can't fix the economy, at least you can fix the data.
Can you say "Jump The Gun"?
Here's my advice for the St. Louis Fed: You guys are pikers! If you want to learn how to massage the data, study how the Chinese do it! And be sure to read The China Daily. Half-assed attempts to make us feel better are contemptible.
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