Chance of recession about the same, about 70%

We had two key economic reports today, one of which was a little more gloomy (unemployment initial claims above 400,000) while the other was a little less gloomy (slight improvement in the ISM Non-Manufacturing report), so the net change is a wash. The ISM report felt like a good sign that the economy was starting to recover, but the simple fact is that you tend to get a number of false starts in any transition phase.

The monthly employment report will be coming out in the morning, but I do not expect it to clarify the probability of recession by very much at all. I would have to see nonfarm payroll employment decline by more than 100,000 to raise my forecast for the chance of a recession. Similarly, payroll employment would have to rise by more than 100,000 to lower my forecast for the chance of a recession.

I continue to rate the chance of a recession in the U.S. economy in 2008 at about 70%.

-- Jack Krupansky