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Indicators Flash Recession Warning ^ | November 10, 2012 | Political Calculations

Posted on 11/10/2012 7:44:19 AM PST by Kaslin

On 30 October 2012, a recession forecasting model developed by Marcelle Chauvet and Jeremy Piger reached what appears to be a critical threshold for anticipating a recession in the U.S. in the very near future.


The Reformed Broker's Joshua Brown comments (HT: Abnormal Returns):

Do you see the percentages on the left side of the chart? 20% is the line in the sand. We've never hit that level and NOT had a recession. In 2006 we got close (18%?) but that particular Great Recession would be a year and half in the making. Note that we're back at that 20% line again. And I can't think of anything that keeps the leading indicators from going through it to the upside - the Fiscal Cliff stuff could only speed its ascent.

One thing we should note is that the data in the chart only covers the period through August 2012 - this is a delayed reaction to a developing situation. The probability of recession in the U.S. suddenly surged to the 20% level from the 2% level recorded a month earlier.

U.S. Recession Probabilities (RECPROUSM156N) 30 October 2012

As it happens, we have another indicator which gave a slightly earlier signal that the U.S. economy is trending toward recession: the number of publicly-traded companies that have acted to cut their dividends. Here is what that data showed through the end of September:

Number of Public U.S. Companies Posting Decreasing Dividends, January 2004 through September 2012

We'd like to be able to update the chart through October 2012, however the aftermath of Hurricane Sandy has impacted Standard and Poor's operations, which has delayed the update of S&P's dividend action report [Excel spreadsheet].

As soon as that report has been updated, we'll post an updated version of our chart. In the meantime, we should note that this trend toward recession would seem to be occurring independently of whatever noise is going on in Washington D.C. with respect to the so-called fiscal cliff, which is confirmed by the Chauvet-Piger recession forecasting model, which does not consider that scenario.

We'll close by noting that what we're seeing in dividends now is not a result of the reactions to what we've described as the "dividend cliff". Here, there's really no hurry for companies to announce dividend cuts this year. Instead, the incentives are such that companies would more likely be announcing special dividend payments to beat the clock on the higher taxes for dividend income scheduled to begin in 2013, delaying the announcement of any plans they might be developing to cut dividends until the new year.

Previously on Political Calculations

Our previous posts on the rising likelihood of recession based on the number of U.S. companies acting to cut their dividends, presented in reverse chronological order:


Chauvet, M. and J. Piger, "A Comparison of the Real-Time Performance of Business Cycle Dating Methods," Journal of Business and Economic Statistics, 2008, 26, 42-49.

Standard and Poor. Monthly Dividend Action Report. [Excel spreadsheet]. As last updated 28 September 2012.

TOPICS: Business/Economy; Editorial; Politics/Elections
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1 posted on 11/10/2012 7:44:23 AM PST by Kaslin
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To: Kaslin

how does it recognize and report a intended obama death spiral?

2 posted on 11/10/2012 7:52:21 AM PST by himno hero (hadnuff)
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To: Kaslin

One week after the election.

How “convenient”.

3 posted on 11/10/2012 7:52:45 AM PST by Cringing Negativism Network (America doesn't need any new laws. America needs freedom!)
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To: Kaslin
Since the election:

Layoff numbers

Organization # Laid off Running total Sector Notes
Abbot Labs 700 700 Med Eq/Dev Mfg
AMD 400 1100 Electronics
American Coal 54 1154 Energy
Ameridose 790 1944 Health
Art Gallery of Windsor 12 1956 Art Gallery Canada
Associated Milk Producers Inc 130 2086 Agriculture
ATI 172 2258 Education
Bartikowsky Jewelers 25 2283 Retail Business closure
Boston Scientific 1200 3483 Med Eq/Dev Mfg
Brake Parts LLC 75 3558 Automotive
Bristol-Myers Squibb 479 4037 Health
Career Education Corp 900 4937 Education
Caterpillar 100 5037 Construction Eq
Center for Hospice and Palliative Care 40 5077 Health
Cigna 1300 6377 Health
Community Newspaper Holdings Inc 21 6398 Media
Covidien 595 6993 Health
Crouse Hospital Syracuse 70 7063 Health
CVPH 17 7080 Health
Dana Holding Corp 7 7087 Automotive
DuPont 64 7151 Defense Kevlar/Nomex plant
Energizer 1500 8651 Energy
Ericsson 1550 10201 Consumer Electronics Cuts in Sweden
Exide 150 10351 Energy
Gameforge Berlin 20 10371 Online Games Cuts in Germany
Groupon 600 10971 Consumer
Hawker Beechcraft 410 11381 Aerospace
Hill-Rom 200 11581 Med Eq/Dev Mfg
Husqvarna 600 12181 Tools Cuts in Sweden
ING 2350 14531 Finacial Services
Kinetic Concepts 427 14958 Health
Lightyear Network Solutions 14 14972 Software/internet
Majestic Star Cassino 80 15052 Entertainment
Medtronic 500 15552 Med Eq/Dev Mfg
Mills Manufacturing 68 15620 Defense
Momentive Performance Materials 150 15770 Chemicals
Murray Energy Corporation 48 15818 Energy
New Energy 40 15858 Energy
OCE 135 15993 Office equip
Penn Refrigeration 40 16033 Commercial Service
PerkinElmer 66 16099
Providence Journal 23 16122 Media
Research in Motion 200 16322 Consumer Electronics
Smith & Nephew 770 17092 Med Eq/Dev Mfg
Southeastern Container 15 17107 Consumer
Space X 100 17207 Defense
SRA International 222 17429 IT Federal contractor
St Jude Medical 300 17729 Health
Stryker 96 17825 Med Eq/Dev Mfg
TE Connectivity 620 18445 Electronics
Teco Coal Corporation 90 18535 Energy
TurboCare 88 18623 Energy
U.S. Cellular 980 19603 Electronics
Umatilla Chemical Depot 34 19637 Defense
UtahAmerican Energy 102 19739 Energy
Vestas 3000 22739 Energy
Welch Allyn 275 23014 Med Eq Mfg
West Ridge Mine 102 23116 Energy
Westinghouse 17 23133 Hi Tech Services
Westinghouse Anniston 50 23183 Defense
Wright-Patterson 115 23298 Defense
Yakima Regional Medical Center 10 23308 Health

Layoffs without exact number specified

Organization % Laid off Sector Notes
Boeing Defense, Space & Security 30 Defense Executive Staff
Corning 4 Manufacturing Executive Staff
EMD Millipore 2 Biotech
Plexus Corp Manufacturing
Saugerties, NY Government
SCA Paper products
Slidell, LA Government "Will try to spread equally"
Standard Bank Group 10-15 Banking London
United Blood Services 10 Health All staff
Wilkes-Barre, PA Government Firefighters

Worker Reduction In Scheduled Time (to below ObamaCare threshold)

Organization % WRIST # Affected Sector Notes
Darden Restaurants Food service
JANCOA Janitorial Services Janitorial Service
Kroger Grocery

4 posted on 11/10/2012 7:56:26 AM PST by null and void (The One can steal an election, but no one can steal our country.)
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To: Kaslin

Duh....when the the first Obama recession end? We never noticed. It was a figment of the Obama media and the crooked Labor Dept. that has been cooking the books since he was inaugurated. But the worst is yet to come.

There were two false “recoveries” during The Great Depression. One lasted over two years, so this should come as no surprise to anyone, especially Helicopter Ben, who claims to be an expert on that era.

5 posted on 11/10/2012 7:59:10 AM PST by txrefugee
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To: Kaslin

Poppycock! You forget - ol’ Barack O’Claus is on the throne for another four and he won’t let it happen! It’s cake and circuses and clowns every day!! (Brought to us by the fringe liberal cesspools on the coasts!)

6 posted on 11/10/2012 7:59:24 AM PST by Twinkie (Do unto others as you would have them do unto you.)
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To: Kaslin

Uhhhh... the first recession was caused by Bush’s first term. This one will be caused by Bush’s second term. If a Dem wins in 2016, then that one will be caused by Bush’s response to Katrina. The one after that will be because Bush messed up the TARP bail-out.

7 posted on 11/10/2012 8:01:41 AM PST by Bogey78O (We had a good run. Coulda been great still.)
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To: Twinkie

... the part I love best is he inherited the disaster!

How unexpected!

8 posted on 11/10/2012 8:06:19 AM PST by himno hero (hadnuff)
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To: Kaslin

well... if we’re going down, thank God Obama is at the helm to get the blame he so richly deserves!

And now that the election is over the government can stop lying about the economic numbers and tell us the truth about how bad the economy is.

9 posted on 11/10/2012 8:07:21 AM PST by TexasFreeper2009 (Obama lied .. the economy died.)
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To: Kaslin

This can easily be explained. Republicans got in the way of increased theft from the productive class, more spending and stimuli, and increased management of our everyday life and business activity. And oh yeah, we eat too much meat.

10 posted on 11/10/2012 8:11:39 AM PST by all the best (`~!)
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To: Kaslin

There is no chart needed to prove the existence of recession to thinking people.

11 posted on 11/10/2012 8:17:41 AM PST by Principled
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To: Kaslin
It's worth noting that none of this has anything to do with the U.S. election.

I would encourage all Freepers to turn off their Fox News -- and occasionally even Rush Limbaugh -- and get their financial news from resources that include a broad international perspective that doesn't have a political agenda here in the U.S. Bloomberg radio is a good example of this, especially when they have astute guests who can give a good overall picture of things.

One guest on a show last year indicated that his bank's investment decisions (I think he may have been a big shot at the Bundesbank of Germany) are predicated on the assumption that the U.S. is going to be in a de facto recession through most of this decade.

Another similar guest who was weighing in on the U.S. election this year mentioned that nobody in either campaign was talking about the things they knew were problematic but weren't worth talking about because they had no politically viable solutions to them. He predicted that the biggest crisis the U.S. will face in the next four years will be the official bankruptcy of the state of California.

Just a FWIW here ...

12 posted on 11/10/2012 8:19:30 AM PST by Alberta's Child ("I am the master of my fate ... I am the captain of my soul.")
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To: all the best

exactly.. we are going down, and all will be blamed as “those evil Republicans in the house” for the next 2 years until the Press has sufficiently demonized them to the point of getting their 99% in places like Philly to go out and vote in the next mid-terms and give this piece of sh*t prez, what he already had in the 1st 2 years...

talked with the wife this morning, we are preparing for the collapse. Guns, cooking, food....

13 posted on 11/10/2012 8:21:20 AM PST by Chuzzlewit
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To: Alberta's Child

As a contrast the elementary school-level economics of Fox and Limbaugh, I recommend people check out the BBC business news. A global perspective is explored there...ah, but the Beeb won’t confirm brainless prejudices and get the peasants all riled up in return for exposure to commercials.

14 posted on 11/10/2012 8:29:15 AM PST by warchild9
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To: Kaslin

Santa bama and the dems own it now, all of it. No more pushing blame off on Bush or anybody else. The destruction of the US economy rests solely on obama’s shoulders, it’s all his fault from now on. Time for the producers to stick it to obamanation and his boot licking RINO toadies.

15 posted on 11/10/2012 8:47:42 AM PST by factoryrat (We are the producers, the creators. Grow it, mine it, build it.)
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To: Alberta's Child

I’ve tried to preach exactly this, but folks won’t listen. They prefer simplistic bromides to actual analysis.

As a coincidence, many people voting for Romney/Ryan thought Ryan had an actual plan to balance the budget. He doesn’t. Never did.

The most ironic thing in all of this are the people who continue to think that taking down the banks for fraud is somehow an attack on “the free market,” when in fact the TBTF banks are the primary reason why we no longer have anything remotely resembling a free market.

16 posted on 11/10/2012 9:19:58 AM PST by NVDave
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To: Cringing Negativism Network

Four more years.

To blame Bush.

17 posted on 11/10/2012 9:23:56 AM PST by unixfox (Abolish Slavery, Repeal The 16th Amendment!)
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To: factoryrat

That assumes that the Republican Castradi have the wherewithal to actually pin the blame on Obama and the Democrats.

Which they don’t... because, as castradi, they have no balls.

18 posted on 11/10/2012 9:26:30 AM PST by NVDave
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To: Kaslin

Idiots, we are still in a recession and it is deepening. Ask suffering Americans. What is coming is a depression worst than the 30’s. We have tanked and it is just a matter of time. Some Countries are still lending us billions in hopes that we go totally communists with a dictator. It has started with King Obama and his communists party. America is finished as we knew it and the Constitution is a worthless piece of paper. I hope not, but reality is setting in.

19 posted on 11/10/2012 9:34:30 AM PST by Logical me
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To: NVDave

Preach if you like, you will notice that Fannie Mae and Freddie Mac are not included in the list of perpetrator banks Obama targets. Well, they are not technically banks, are they? So, and because they are creatures of the Democrat Party, they get a pass, and more bailouts.

Not only does Obama not have a “balanced” plan to tackle the fiscal cliff, he continues to promote exactly the policies that led to the credit/banking meltdown of 2008.

Dodd/Frank enshrine the TBTF banks, and yet talk of “forgiving” student loans and even home mortgages has been floated before. Imagine the result of these “visionary” initiatives. What will be left of the free market after that?

20 posted on 11/10/2012 9:36:04 AM PST by Richard Axtell (put your money into canned food and shotguns)
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