There’s been a lot of speculation about the timing of the next recession. As we wrote, nearly three-quarters of business economists see one coming before the end of 2021. With that bleak prognostication on the table, then, FiveThirtyEight reminds us that economists are bad at predicting recessions.
…economists have a terrible track record when it comes to predicting recessions.
“Very, very few recessions have been predicted nine months or a year in advance,” Prakash Loungani, an economist at the International Monetary Fund, told me.
This doesn’t mean a recession won’t strike in the near future. Over the past few weeks and months, there have been some worrisome signals about the country’s economic health, fueling broader concerns about an impending recession.
…“There’s no economic data or research or analysis that suggests we can look 12 months into the future and predict recessions with any confidence,” said Tara Sinclair, a professor of economics at George Washington University.
FiveThirtyEight writer Amelia Thomson-DeVeaux points to a risk and a potential upside.
It’s possible that the anxious headlines about an impending recession could become self-fulfilling if everyday people respond by saving their money instead of spending it. Or maybe the opposite will happen, and smart policy responses to early warning signals could ward off a recession or make it less damaging.
Either way, the unpredictability of human behavior will frustrate anyone trying to pin down exactly when a recession will arrive.
The Wall Street Journal editorial board thinks recession fears are overblown. Reviewing the four major components of GDP – consumption, government spending, net exports and business investment – the WSJ acknowledges concerns with the trade war and declining business investments, but sees no immediate risk. Yes, there will be a downturn, but,
Someday we’ll have a recession, but not soon.
Uncertainty remains a concern, but the perspective is useful.