No early warning? Of course there's an early warning.

Anticipating recession, John Mauldin writes:

Look around at all the great economic news. I’m aware of it. But the economy was hitting on all cylinders in early 2000 and late 2006, too. The numbers always look great right before a recession. Then it all rolls over at once.

I'll throw the challenge flag.

The economy was hitting on all cylinders in late 2006? Depends what numbers you look at.

Graph #1: Household Debt, Quarterly Change in Billions

The growth of Household Debt peaked in the first quarter of 2006. It was seriously downhill from there to the recession. And come to think of it, household debt peaked in the first quarter of 2000, a year or more before the 2001 recession. So I don't buy Mauldin's story that the numbers are all great and then suddenly there's a recession. I don't buy that.

By the way, the most recent data FRED provides at the moment is for the last quarter of 2017. It shows increase. It shows a trend of increase. No indication of recession.

As indicators go, the yield curve Mauldin discusses may be a little more "leading" than the change in household debt. But at the moment, the debt numbers give no indication of impending recession.


Nor do the Change in Employment numbers suggest impending recession:

Graph #2: Change in Employment

After running pretty flat (jiggy, but flat) from 1997 to 2000, the change in employment suddenly started dropping. A year or so later, recession.

After showing increase since the 2001 recession, the change in employment peaked in 2005 and started dropping. Two and a half years later, recession.

Since climbing out of the 2008-09 recession, the change in employment has run rather flat. You might see a hint of an S-curve in the trend. But there is definitely no dropping off. There is no indication of recession at this time.


Capacity Utilization wanders a lot. But it goes downhill fast during recessions. It tends to fall or to run flat for six months or more before a recession. but sometimes the "downhill fast" starts even before the recession. Notice, though, that Capacity Utilization is never going uphill fast when a recession starts.

Graph #3: Capacity Utilization

At the moment, Capacity Utilization is going uphill fast.

My conclusions: No impending recession. And there are always early warnings.