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Recession Watch, July 2019

Summary:
With the release of nonfarm payroll employment (NFP) numbers today, we have a new set of readings on indicators emphasized by the NBER BCDC (used in dating the end of the 2001 recession), since my last post on recession indicators. While NFP continues to trend upwards, industrial production, personal income excluding current transfers, manufacturing and trade industry sales are all below recent peaks. Monthly GDP has risen to match the last peak in January 2019. Figure 1: Nonfarm payroll employment (blue), industrial production (red), personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), and monthly GDP in Ch.2012$ (pink bold), all log normalized to 2019M01=0. Source: BLS, Federal Reserve, BEA, via FRED, Macroeconomic Advisers (6/27

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With the release of nonfarm payroll employment (NFP) numbers today, we have a new set of readings on indicators emphasized by the NBER BCDC (used in dating the end of the 2001 recession), since my last post on recession indicators. While NFP continues to trend upwards, industrial production, personal income excluding current transfers, manufacturing and trade industry sales are all below recent peaks. Monthly GDP has risen to match the last peak in January 2019.

Recession Watch, July 2019
Figure 1: Nonfarm payroll employment (blue), industrial production (red), personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), and monthly GDP in Ch.2012$ (pink bold), all log normalized to 2019M01=0. Source: BLS, Federal Reserve, BEA, via FRED, Macroeconomic Advisers (6/27 release), and author’s calculations.

Industrial production, while rising, is 0.9% below recent peak. I computed the first principle component of the four variables (excl. monthly GDP) over the 2017M01-19M04 period, and plot this series and log GDP (both normalized to 2019M01=0). As a whole, the common component of the four variables has been essentially flat since 2019M01.

Recession Watch, July 2019
Figure 2: First principle component of nonfarm payroll employment, industrial production, personal income excluding transfers in Ch.2012$, manufacturing and trade sales in Ch.2012$, estimated over 2017M01-2019M04 (brown), and monthly GDP in Ch.2012$ (pink bold), all normalized to 2019M01=0. Source: BLS, Federal Reserve, BEA, via FRED, Macroeconomic Advisers (6/27 release), and author’s calculations.

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

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