The FRED® Blog

How likely is a recession? (And how fast is a forecast?)

Predicting a recession in real time is difficult, which is why one can make good money with a good forecast. Here, FRED offers one of many such forecasts: a recession probability index computed by Marcelle Chauvet and Jeremy Piger. This forecast is backed up by research the authors have published in the peer-reviewed journals International Economic Review and the Journal of Business and Economic Statistics, with an early St. Louis Fed working paper added here for good measure. As the graph above shows, their forecasting method’s past performance is impressive; the predicted recession dates align well with the official NBER recession dates. Of course, it is difficult to compute any forecast in a timely fashion: One has to wait for the appropriate data to be released, and only then can one compute the forecast. In this case, that translates into a delay of about three months.

How this graph was created: Search for “recession,” and the first series shown should be “Smoothed U.S. Recession Probabilities.”

Suggested by Christian Zimmermann

View on FRED, series used in this post: RECPROUSM156N

Net migration: The Far East is the new Southwest

Recent data from the U.S. Census Bureau show that China has overtaken Mexico as the source of the largest number of immigrants to the U.S. FRED can add some insight to this topic: Although FRED doesn’t include country-by-country migration data, it does include net migration data for each country in the World Bank’s World Development Indicators release. The list of countries is long. The graph above looks at only the three countries noted here. The U.S. is a net immigration country, while China and Mexico are net emigration countries. No surprise there. What may be a little unexpected is how large the fluctuations have been from one five-year period to the next. Also, migration out of China has increased (by an order of magnitude) despite many years of impressive economic growth. Indeed, aggregate economic conditions are not likely to be the sole driver for migration choices.

Note: In 2013, the most-recent year for which complete Census data are available, Mexico actually sent the third-largest number of immigrants to the U.S. As noted above, China sent the most, but India is now in second place.

How this graph was created: Search for net migration, and the U.S. should appear first. Scroll through the list or use the “Add Data Series” tab to search for and add China and Mexico (and many other countries) to the graph.

Suggested by Christian Zimmermann

View on FRED, series used in this post: SMPOPNETMCHN, SMPOPNETMMEX, SMPOPNETMUSA

Labor force participation: Is a trend or a cycle at work?

One major concern since the start of the recent recession has been the labor force participation rate. The graph above shows a clear and continuing decline. However, when you reveal the full sample, as shown in the graph below, you can see the decline started before the recession and the current level is not the lowest in postwar history. It appears, then, at least part of the current evolution of labor force participation has to do with a longer-term trend. What forces are at work here? Clearly, the rise in labor force participation had to do with many women entering the labor force. The subsequent decline has to do with the aging of the population, with a significant increase in the proportion of retirees. Also, the younger population is staying in school longer than before. Articles by Marianna Kudlyak and Maria Canon and Marianna Kudlyak provide more insight on this topic.

How these graphs were created: For the first, search for and add “Civilian Labor Force Participation” to the graph, but restrict the range to start in January 2008. (Note: The seasonally adjusted series is much easier to read.) To add the trend line, go to “Add Data Series” and select “Trend Line” from the pull-down menu: Start the line at 2008-01-01, with the value of 66.2. For the second, create the same graph but use the full sample, which starts in 1948.

Suggested by Christian Zimmermann.

View on FRED, series used in this post: CIVPART