Why The U.S. Can Avoid A Recession
Economist Says His Indicator That Predicted Eight US Recessions Is Wrong This Year (2023)
TLDR
Campbell Harvey made a name for himself when he published his dissertation back in 1986.
“My yield-curve indicator has gone code red, and it’s 8 for 8 in forecasting recessions since 1968 — with no false alarms,” Harvey, now a professor at Duke University’s Fuqua School of Business, said in a interview Tuesday. “I have reasons to believe, however, that it is flashing a false signal.”
One of the reasons is the fact the yield curve-growth relation has become so well known and widely covered in popular media that now it impacts behavior, he said. The awareness induces companies and consumers to take risk-mitigating actions, such as increasing savings and avoiding major investment projects — which bode well for the economy.
Another boost to the economy is coming from the job markets, where the current excess demand for labor means laid-off workers will likely find new positions more quickly than usual. In addition, he said, given the largest job cuts so far have been in the tech sector, those highly skilled recently fired workers are also not apt to be unemployed for very long.
“In science we use models all the time, and they’re simplifications of reality,” he said. “And part of the skill of the scientist is to know when to deploy the model and when not to or, in other words, to know the limitations of the model. And maybe I’m in a good position of knowing the limitations, given that it’s my model.”
Is the economy bad where you are at? Let us know so we can compare notes.
In Texas and Louisiana, driving around these two states alone, I see construction work everywhere, land being cleared, construction work for both residential and commercial, still see a lot of hiring signs…
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