NY Fed Model: No Chance of a Double-Dip in 2011

The New York Federal Reserve updated its “Probability of U.S. Recession Predicted by Treasury Spread” today with treasury yield data through June 2010, and the Fed’s recession probability forecast through June 2011 (see top chart above). The NY Fed’s Treasury model uses the spread between the yields on 10-year Treasury notes (3.2% in June) and 3-month Treasury bills (0.12% in June) to calculate the probability of a U.S. recession up to twelve months ahead (see details here) using the spread between those two yields (3.08% in June, see bottom chart above).

The Fed’s model (data here) shows that the recession probability peaked during the October 2007 to April 2008 period at around 35-40%, and has been declining since then in almost every month. For June 2010, the recession probability is only 0.06% and by a year from now in June of next year the recession probability is only slightly higher, at only 0.18% (less than 1/5 of 1%).

According to the NY Fed Treasury Spread model, the chances of a double-dip recession through the middle of next year are essentially zero, see earlier CD post here.

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About Mark J. Perry 262 Articles

Affiliation: University of Michigan

Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan.

He holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University in Washington, D.C. and an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota.

Since 1997, Professor Perry has been a member of the Board of Scholars for the Mackinac Center for Public Policy, a nonpartisan research and public policy institute in Michigan.

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