Smoothed U.S. Recession Probabilities

The probability of recession stands at 1.72%. When this recession indicator exceeds 5% (red line), history suggests that the probability of recession increases significantly. The chart shows the smoothed U.S. recession probabilities indicator on a log scale.

Smoothed U.S. recession probabilities are obtained from a dynamic-factor markov-switching model applied to four monthly coincident variables: real personal income excluding transfer payments, index of industrial production, non-farm payroll employment, and real manufacturing & trade sales.

Smoothed U.S. Recession Probabilites