Predicting Recessions

Murphy, Thomas; Romero, Jessie; Webb, Roy H.

Briefing

Predicting Recessions

Abstract: This Economic Brief evaluates the predictive capabilities of the yield curve and several other leading indicators, including the Conference Board Leading Economic Index (LEI), claims for unemployment insurance, manufacturing activity, consumer lending, and CEO optimism. According to in-sample statistical analysis, several indicators — particularly the three-month/ten-year term spread and the LEI — have demonstrated significant value in predicting recessions during the past sixty years.

Keywords: Economic Growth and Fiscal Policy;