Recession Watch: No Evidence Of A Double Dip

by: Mark J. Perry
According to the National Bureau of Economic Research, a recession is a "significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales." Here's how some of those key recession-indicating variables are doing:
1. Industrial production: Increased by 4.67% at an annual rate over the most recent three month period from May to August.
2. Private payroll employment: Increased by 1.27% at annual rate during the most recent three month period from May to August.
3. Real GDP: Increased by 1.33% in the second quarter.
4. Real Retail sales: Decreased by 0.56% in the May-August quarter, at an annualized rate.
Other indicators:
5. Automakers are reporting strong sales gains in September vs. last year: Chrysler +27%, Ford +9% and GM +20%.
6. The September ISM manufacturing index beat consensus expectations today and increased to a three-month high of 51.6%, which when annualized is historically consistent with 3.2% real GDP growth in the third quarter.

7. Weekly rail freight shipments are showing ongoing signs of increases in economic activity, not declines.

8. Jeremy Piger's "recession probability" (based on four monthly variables: non-farm payroll employment, industrial production, real personal income excluding transfer payments, and real manufacturing and trade sales) was updated last week for July at 0.9% (less than 1 out of 100 chance), unchanged from June, and down from 1.2% in May and 1.1% in April.

MP: All of the variables reported above are positive except for real retail sales during the most recent quarter. Taken together as a group, these positive indicators suggest that while the current expansion might be sup-par, the economy is certainly not experiencing any of the significant, persistent and widespread declines that would lead the NBER to declare sometime next year that the U.S. economy entered a recession in any of the recent months.