A reliable source for recession forecasting is the unemployment rate, which can provide signals for the beginnings and end of recessions (Appendix B charts the UER recession indicator for the period 1948 to 2015). The unemployment rate model (article link) updated with the March 2017 rate of 4.5% does not signal a recession.
The model relies on four indicators to signal recessions:
- The short 12-period and a long 60-period exponential moving average (EMA) of the unemployment rate (UER).
- The eight-month smoothed annualized growth rate of the UER ((UERg)).
- The 19-week rate of change of the UER.
The criteria for the model to signal the start of recessions are given in the original article and repeated in the Appendix.
