Fed Data suggests there was no recession in September

The probability that the U.S. was in a recession in September is close to zero percent, the St. Louis Federal Reserve reported this week, despite widely reported fears of a recession in that month and public opinion polling showing that many Americans thought a recession had already begun.

Data from the St. Louis Fed updated Tuesday showed that the chances of recession in the U.S. in September were less than half of 1 percent.

Recessions are dated retrospectively by a committee in the National Bureau of Economic Research (NBER). The St. Louis Fed data looks at the same factors as the NBER, only in real time as opposed to looking back.

“So far in 2022, we’re not seeing the kind of declines in employment or industrial production that would indicate we’re in a recession,” Jeremy Horpedahl, associate professor of economics at the University of Central Arkansas, said in an interview. “It’s a pretty accurate model. It doesn’t tend to miss when there is a recession starting.”

“During 2022, there hasn’t yet been any month where that model has suggested we’re in a recession,” he added.

The low probability of recession came after numerous public opinion surveys over the summer found that majorities of Americans believed a recession had already started.

One poll released in August by real estate company Cinch Home Services found that 76 percent of Americans believed a recession had already begun. Another by Morning Consult put that number at 65 percent.

While the economy contracted in the first two quarters of 2022, fueling popular speculation that a recession had started, GDP bounced back in the third quarter to 2.6 percent. Even during the first two shrinking quarters, factors like employment and consumption were still strong 

“Part of the disconnect for the general public or even a lot of economic journalists, a recession might be defined broadly as, you know, when some economic things are bad. Inflation is really bad now, for example. But economists tend to look more at questions of production, employment, real incomes. And on those measures, we’re not seeing the declines we would normally see in a recession yet,” Horpedahl said.

Other economists have made similar observations.

“Virtually everything points in the opposite direction from the slight fall in GDP measured on the product side,” Jeffrey Frankel, a former member of the committee within the NBER that designates recessions said in an interview in October.

“You just can’t call it a recession when you have the ratio of vacancies to unemployed workers the highest it’s ever been. I mean, that’s just so far from a recession,” he said.

Updated 1:29 p.m.