Recession Odds

Market watchers are all interested in the odds of a recession.  You will not get an accurate view from stories making a big splash.  Since an economist is unlikely to be newsworthy by predicting a 10% chance, it is not surprising that Barry Ritholtz’s citations of recession odds predictions ranges from 30% to 70%.  (Roubini is getting a lot of publicity for his extreme viewpoint.)  Unless a reader of these stories has also read the Wall Street Journal economist poll, the impression will be misleading.

Enjoy Barry’s links (and thanks to him for the work even while in Denver).  Then take a look at our comments on the WSJ recession odds.

Link: Rocky Mountain Linkfest!.

Another week, another collection of mayhem: From the Fed pause to the not-so-friendly skys, indices lost between 1-1.5% this week, as investors digested lots of news this week. Surprisingly, the airports were not nearly as problematic as you might have …

The WSJ asked 56 financial economists the odds of a recession during the next twelve months.  The average response was 26%, up from about 15% in May.  The range of estimates was from 5% at the low to 98% at the high.  We might note that to reach the 26% average, anyone saying 98% would need to be balanced by THREE economists saying 5%.

It is clear that most experts think the odds of a recession are higher now than a few months ago.  It is also clear that most think a recession is unlikely, despite the impression conveyed by the extremists getting all of the publicity.

At "A Dash" we like to focus on the best evidence from the best sources, avoiding the publicity hounds and extremists.

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2 comments

  • Barry Ritholtz August 13, 2006  

    Note that these same 56 Economists in the Fall of 2000 projected a GDP of 3.1%; It turned out to be between 0 and -0.75%.
    Forecasting is not what economists do well — especially at turning points

  • oldprof August 13, 2006  

    Barry — Thanks for taking the time to stop by. Everyone is trying to get edge. In your article on the economists you say that they are “finally getting a clue” because they are moving toward your projection.
    I am more modest. I think that the consensus of economists is better at predicting than I am as an individual.
    Everyone has trouble at turning points — not just economists.

Recession Odds

Market watchers are all interested in the odds of a recession.  You will not get an accurate view from stories making a big splash.  Since an economist is unlikely to be newsworthy by predicting a 10% chance, it is not surprising that Barry Ritholtz’s citations of recession odds predictions ranges from 30% to 70%.  (Roubini is getting a lot of publicity for his extreme viewpoint.)  Unless a reader of these stories has also read the Wall Street Journal economist poll, the impression will be misleading.

Enjoy Barry’s links (and thanks to him for the work even while in Denver).  Then take a look at our comments on the WSJ recession odds.

Link: Rocky Mountain Linkfest!.

Another week, another collection of mayhem: From the Fed pause to the not-so-friendly skys, indices lost between 1-1.5% this week, as investors digested lots of news this week. Surprisingly, the airports were not nearly as problematic as you might have …

You may also like

2 comments

  • Barry Ritholtz August 13, 2006  

    Note that these same 56 Economists in the Fall of 2000 projected a GDP of 3.1%; It turned out to be between 0 and -0.75%.
    Forecasting is not what economists do well — especially at turning points

  • oldprof August 13, 2006  

    Barry — Thanks for taking the time to stop by. Everyone is trying to get edge. In your article on the economists you say that they are “finally getting a clue” because they are moving toward your projection.
    I am more modest. I think that the consensus of economists is better at predicting than I am as an individual.
    Everyone has trouble at turning points — not just economists.