Are We in a Recession?

The NYT offers six opinions to this question in today's paper. Two of them caught my eye. One is NBER head, Martin Feldstein, who explains briefly the role of the NBER in dating the start and end of business cycles. He notes we can't say, since the data isn't in, and it takes NBER a few months to analyze it, but at least as far as November is concerned, it does not look like we're in a recession. He ends, though, with the cautionary tone that 2008 is another matter.

"My judgment is that when we look back at December with the data released in 2008 we will conclude that the economy is not in recession now.

There is no doubt, however, that the economy is slowing. There is a substantial risk of a recession in 2008. Whether that occurs will depend on a variety of forces, including monetary policy and a possible fiscal stimulus."

I wonder what fiscal stimulus package could move through Congress? Another tax cut? We're about to cut back on the surge in Iraq, which would be a fiscal reduction, not an increase which may be needed.

The other article that caught my eye was Chauvett and Hassett's "Facts Say No" which is interesting mainly because it discusses James Hamilton's recession probability index (here for some more on it). Hamilton's model uses real-time data to predict whether the economy is currently in a recession. As it is a probability index, it is bounded from 0 to 100 and thus represents an estimated probability, and should be interpreted as such. The writers report that the index currently suggests there is a 16% chance that the economy is in a recession, which is a kind of perverse Goldilocks middle - not too high, but not low enough to be out of the woods.