Recession Watch Indicator for week ended September 7, 2012

Here's my own personal cut at a recession watch indicator, for week ended September 7, 2012:

• ECRI Weekly Leading Index Growth Rate: modestly positive (+1.0) – pale green flag (+1)
• Weekly Employment Insurance Initial Claims moving average: elevated but below 400K (370K) – pale green flag (+1)
• Recent M2 Money Stock: rising – pale green flag (+1)
• Macroeconomic Advisers GDP outlook for Q3: modest growth (lowered to +2.0%) – pale green flag (+1)
• Recent Employment Growth: modest (95K) – pale green flag (+1)
• Recent ISM Manufacturing Reports: slightly negative (49.6) for third month – pale yellow flag (-1)
• Recent ISM Services Reports: modestly positive (rose to 53.7) – pale green flag (+1)
• Average: +0.71 – pale green – recession not likely although still remotely possible

No real change in the overall outlook since last week.

 

ECRI still insists that we are already in what could be called an "invisible" recession (my words), but I would assert that the ongoing strength of the service sector of the economy overwhelms the weaker manufacturing sector. I suspect that ECRI's long-term data series history is biased by a manufacturing sector that has increasingly become less relevant as the decades and years have gone by.

 

I'll make a separate post on the prospects for a recession when the U.S. government hits the so-called "fiscal cliff" in 2013. In short, I believe that we will sidestep a full-blown recession, even if we do have a very weak or even negative quarter or two.

 

-- Jack Krupansky