the “R” word

Daniel Gross on predicting recessions:

The problem with recession forecasting is that you never know when a recession has started until long after it begins. The National Bureau of Economic Research is the official dater of recessions, and it doesn’t make forecasts. We could be in a recession now, for all we know. Lakshman Achuthan and the team at the Economic Cycle Research Institute have an excellent track record on predicting recessions (they were among the only forecasters to accurately predict the last recession). And they still believe the expansion is intact.

(…) So, be careful however you bet. Relying on professional economic forecasters to tell us when a recession will start—and how long it will last—will be like relying on weather forecasters to tell us today whether it will rain on Labor Day weekend.