Analysis of factors that herald an economic crisis

Confidence indexes

Bumpy road for confidence
Sentiment among American consumers and businesses remains historically elevated but dipped in the early months of 2019.

Even in economics, it matters how people feel. Case in point: The ongoing U.S.-China trade war. The conflict officially started in July 2018, when 25 percent tariffs took effect on $50 billion worth of goods. But since then, it’s escalated, with 25 percent tariffs now in place on an additional $200 billion worth of products.

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   Employment Data
   

Jobless rate flirts with 50-year low
The unemployment rate in August held at 3.7 percent, near the lowest level since 1969.

Employers in the U.S. added 128,000 jobs in October, blowing past the median estimate among economists for an 85,000 gain, according to a survey by Bloomberg.

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   The Federal Reserve Bank of New York’s recession probability model
   

Recession probability climbing
The Federal Reserve Bank of New York is currently betting a 31.48 percent chance that a recession will occur in the next 12 months.

Based on the spread between the 10-year and three-month Treasury yields, the regional New York Fed compiles data about the likelihood of a recession in the year ahead. It’s updated typically at the beginning of each month, with the last release occurring on Aug. 2. Currently, the index says there’s a 31.5 percent chance of a recession within the next 12 months. That’s the highest since before the start of the Great Recession and a warning sign for the U.S. economy, Donisanu says. That’s because the index doesn’t typically flash a yellow light until it reaches 30 percent. But even though it has reached that threshold, it still wouldn’t be completely out of line with other economists’ estimates, who are starting to forecast that a recession could happen in 2020.

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