Recession Watch Indicator for week ended September 28, 2012

(Sorry for the delay. Note: This does not include the ISM manufacturing report for October.)

 

Here's my own personal cut at a recession watch indicator, for week ended September 28, 2012.

• ECRI Weekly Leading Index Growth Rate: modestly positive (+3.8) – pale green flag (+1)
• ECRI recession call: yes, a real negative - bright yellow (-2)
• Weekly Employment Insurance Initial Claims moving average: elevated but reasonably below 400K (374K) – pale green flag (+1)
• Recent M2 Money Stock: rising – green flag (+2)
• Macroeconomic Advisers GDP outlook for Q3: modest growth (+1.7%) – pale green flag (+1)
• Recent Employment Growth: modest (96K) – 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: +0.50 – 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 continue to expect that the "fiscal cliff" in 2013 will result in some economic weakness, but not an outright deep and prolonged recession. Call it a weak recession or a semi-recession if you want, but not a full, deep recession. Flip a coin as to whether the economists at NBER officially "date" it as a recession.

 

-- Jack Krupansky