Updates on some of the series we regularly follow, and they’re not good.

On Thursday the Federal Reserve Board announced that its index of industrial production fell by 2.8% in the month of September (yes, as in 33.6% at an annual rate). That’s the biggest monthly decline in the index since January 1975. To put it in perspective, UCLA Professor Ed Leamer suggested last August that a 6-month decline of more than 3% should be characterized as a recession. That had been the

one holdout among Leamer’s four indicators in suggesting that the economic situation was still not so bad. But according to Leamer’s criterion, the September drop in industrial production almost counts as a recession all by itself.

100 times the 6-month change in natural log of index of industrial production,
from FRED, with NBER recessions as shaded regions …

UCLA Professor Ed Leamer recently proposed four criteria for determining whether the economy is in recession, and concluded at the time of his study (two months ago) that the U.S. had not yet crossed that threshold. But this week’s data might cause him to change his mind.

Professor Leamer observed that recessions are usually characterized by a 6-month drop in civilian employment of more than 0.4% as measured by the BLS household survey. At the time he wrote his paper, the U.S. fell just short of that standard. But the BLS reported on Friday that this measure fell by 222,000 jobs in September, putting the 6-month change at -0.5%. On the basis of this number, Leamer would now have to change his call.

100 times the 6-month change in natural log of civilian employment,
from FRED, with NBER recessions as …

Is there anything good to say about today's report from the Bureau of Labor Statistics that the U.S. unemployment rate jumped up to 6.1% while seasonally adjusted nonfarm payrolls declined by another 84,000 jobs? Well, here's one thing. It gives us some real clarity as to just where the economy stands.

Civilian unemployment rate, from FRED, with NBER recessions as shaded regions.

Sure looks like a recession when you inspect a graph the unemployment rate, doesn't it? And it also looks like a recession from the perspective of a model of unemployment dynamics that I published in 2005. If you use that model to analyze the latest unemployment numbers, you'd calculate the current probability of being in a recession at 95%.

Probability that the economy is in either a mild or severe recession at indicated date, ...

Article Source Many people may not care whether our current situation meets the formal definition of a recession, but as I've explained previously, you should. Here's a summary of how I see the economy at the moment. I begin by discussing a new paper by UCLA Professor Ed Leamer, which has also been highlighted by Greg Mankiw, Frank Stephenson, Calculated Risk, and Brian Blackstone. Leamer looks at four key series, asking what threshold each has to cross in order to be included in episodes that the National Bureau of Economic Research characterized as economic recessions. Leamer observes that it's typically called a recession if the 6-month growth rate of nonfarm payroll employment falls below -0.5%. 100 times the 6-month change in natural log of seasonally adjusted nonfarm payroll employment, from FRED, with NBER recessions as shaded regions ...