A reliable source for recession forecasting is the unemployment rate which can provide signals for the beginnings and end of recessions. (Appendix B charts the UER recession indicator for the period 1948 to 2015.) The unemployment rate model (article link), updated with the November figure of 4.6%, does not signal a recession now.
The model relies on four indicators to signal recessions:
- The short 12-period and a long 60-period exponential moving average (EMA) of the unemployment rate (UER),
- The 8-month smoothed annualized growth rate of the UER (UERg).
- The 19-week rate of change of the UER.
The criteria for the model to signal the start of recessions are given in the original article and repeated in the Appendix.
Referring to the chart below, and looking at the end portion of it, one can see that none of the conditions for a recession start are currently present.
