Cartoon

Strongman

JM Ashby
Written by JM Ashby

(Cartoonist - Rob Rogers)

In other news, the number of people infected by the Wuhan coronavirus has climbed to 24,500 according to the Associated Press's latest tally. The death toll has increased to 490.

Meanwhile, just 15.23 million people watched Trump's State of the Union speech last night according to Nielsen ratings data. That's down from 45 million last year, a drop of 30 million.

That's gonna leave a mark.

Finally, researchers at MIT say there's a 70 percent chance of a recession starting in the next six months based on economic conditions that are currently comparable to conditions prior to previous recessions.

The method they used is peculiar, to say the least, but that doesn't mean they're wrong.

“The Mahalanobis distance was originally conceived to measure the statistical similarity of the values of a set of dimensions for a given skull to the average values of those dimensions for a chosen group of skulls,” the researchers explained.

It measures the distance between a point and a certain distribution.

Using this principle, the researchers analyzed four market factors — industrial production, nonfarm payrolls, stock market return and the slope of the yield curve — on a monthly basis. They then measured how the current relationship between the four metrics, assessed on a monthly basis, compares to historical readings.

Looking at data back to 1916, the researchers said that the index was a reliable recession indicator since it rose leading up to every prior recession. They found that when the index topped 70%, the likelihood of a recession in the next six months rose to 70%. As of November 2019, the reading on the index was 76%.

  • Draxiar

    By that metric a recession should begin around August. I know there’s an official definition of a recession (2 quarters of negative economic growth measured by the GDP) but manufacturing is already in recession and the yield curve is inverted. So it’s seems the start of a recession fluid thing according to perspective. In any case, this is a fascinating way to measure such a thing.