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Is California in Recession? (Part XVI)

Summary:
February coincident indices from the Philadelphia Fed are out. Time to re-evaluate this assessment from slightly over a year ago in Political Calculations that California was in recession. Going by these [household survey based labor market] measures, it would appear that recession has arrived in California, which is partially borne out by state level GDP data from the U.S. Bureau of Economic Analysis. [text as accessed on 12/27/2017] The release provides an opportunity to revisit this question (the Q3 GDP figures are discussed here). It’s (still) unlikely that a recession occurred. Figure 1: Log coincident index in US (black), and in California (blue), both in logs, normalized to 2011M01=0. Blue arrow at timing of Political Calculations recession conjecture. Source: Philadelphia Fed

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February coincident indices from the Philadelphia Fed are out. Time to re-evaluate this assessment from slightly over a year ago in Political Calculations that California was in recession.

Going by these [household survey based labor market] measures, it would appear that recession has arrived in California, which is partially borne out by state level GDP data from the U.S. Bureau of Economic Analysis. [text as accessed on 12/27/2017]

The release provides an opportunity to revisit this question (the Q3 GDP figures are discussed here). It’s (still) unlikely that a recession occurred.

Is California in Recession? (Part XVI)
Figure 1: Log coincident index in US (black), and in California (blue), both in logs, normalized to 2011M01=0. Blue arrow at timing of Political Calculations recession conjecture. Source: Philadelphia Fed and author’s calculations.

According to my work with Ryan LeCloux, the growth elasticity of real GDP with respect to coincident index is about 0.60 (statistically significant), so we can be reasonably certain that GDP is still trending up.

Menzie Chinn
He is Professor of Public Affairs and Economics at the University of Wisconsin, Madison

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