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Federal Reserve Bank of San Francisco
FRBSF Economic Letter
Is a recession imminent?
John G. Fernald
Bharat Trehan
Abstract

The sharp slowdown in housing and the inverted yield curve have led to concerns that the odds of a recession have risen. For instance, Dow Jones Newswire reported on November 2 that one model based on the yield curve put the probability of a recession over the next four quarters at more than 50%. This Letter presents and discusses various estimates of the probability of recession. Our review of the evidence suggests two conclusions: First, recessions appear difficult to predict; second, while the probability of a recession over the next year may now be somewhat elevated, it does not appear to be nearly as high as the yield curve suggests.


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John G. Fernald & Bharat Trehan, "Is a recession imminent?" , Federal Reserve Bank of San Francisco, FRBSF Economic Letter, number 32, 2006.
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Keywords: Recessions ; Economic forecasting
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