Recession Model Update (February 2020)
Friends,
Model recession probabilities held steady last month. The overall mood of the markets is pretty upbeat, and a recession *feels* nowhere in sight to market observers.
In January, US payrolls expanded by 225,000, beating the consensus forecast.
Since January 2019 (12 months ago), the labor force is up 1.5 million, while the jobless rate fell to 3.6% from the 4.0%.
The labor force participation rate increased to 63.4% in January, the highest reading since early 2013. Participation among "prime-age" adults (25 to 54) hit 83.1%, the highest since the Lehman Brothers bankruptcy in 2008.
The ISM Non-Manufacturing index increased to 55.5 in January, beating the consensus expected 55.1
Meanwhile, the "novel coronavirus" has replaced Iran on the worry list. It may take awhile for the full effects of the outbreak to show up in economic data points, so it doesn't seem like there are many immediate catalysts for recession. The model predictions below seem to reflect this view as well.
Current Predictions (as of February 7, 2020)
In light of the market's positive feelings, one can still find areas of concern if they look hard enough:
Until Next Time
Terrence | terrencez.com
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