Menzie Chinn thinks we may already be in a recession

Menzie is not a perpetual bear, so his analysis bears consideration:

Over a year ago, I argued that Brad Delong was correct in asserting we wouldn't know if we were in a recession until we were well into one. I also mentioned that I didn't think we were in a recession at the time, largely because industrial production was still rising, and had not seemingly peaked as of August 2006.

That characterization no longer holds true. Originally, I was reassured by the experience during the last recession. In the March 2001-November 2001 recession, production (using the most recent vintage of industrial production series -- see this post regarding revised and real time data) peaked some 9 months or so before the onset of the recession.

Unfortunately, this characterization does not hold for the July 1990-March 1991 recession.

Industrial production continues to fade in importance as a contributing factor of economic growth. So I am still short these recession contracts (while being quite bearish on the financial sector):


UPDATE: Labor market continues to look strong, which reduces recession risk.