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The Economics of Walking About and Predicting US Downturns

Author

Listed:
  • David G. Blanchflower

    (Bruce V. Rauner ’78 Professor of Economics, Dartmouth College, Hanover, NH 03755-3514. Adam Smith School of Business, University of Glasgow and NBER)

  • Alex Bryson

    (Professor of Quantitative Social Science, UCL Social Research Institute, University College London, 20 Bedford Way, London WC1H 0AL)

Abstract
Economic shocks are notoriously difficult to predict but recent research suggests qualitative metrics about economic actors’ expectations are predictive of downturns. We show consumer expectations indices from both the Conference Board and the University of Michigan predict economic downturns up to 18 months in advance in the United States, both at national and at state-level. All the recessions since the 1980s have been predicted by at least 10 and sometimes many more point drops in these expectations indices. A single monthly rise of at least 0.3 percentage points in the unemployment rate also predicts recession, as does two consecutive months of employment rate declines. The economic situation in 2021 is exceptional, however, since unprecedented direct government intervention in the labor market through furlough-type arrangements has enabled employment rates to recover quickly from the huge downturn in 2020. However, downward movements in consumer expectations in the last six months suggest the economy in the United States is entering recession now (Autumn 2021) even though employment and wage growth figures suggest otherwise.

Suggested Citation

  • David G. Blanchflower & Alex Bryson, 2021. "The Economics of Walking About and Predicting US Downturns," DoQSS Working Papers 21-31, Quantitative Social Science - UCL Social Research Institute, University College London.
    • Handle: RePEc:qss:dqsswp:2131
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    References listed on IDEAS

    as
    1. Blanchflower, David G, 1991. "Fear, Unemployment and Pay Flexibility," Economic Journal, Royal Economic Society, vol. 101(406), pages 483-496, May.
    2. David G. Blanchflower & Chris Shadforth, 2009. "Fear, Unemployment and Migration," Economic Journal, Royal Economic Society, vol. 119(535), pages 136-182, February.
    3. Bertoli, Simone & Moraga, Jesús Fernández-Huertas & Guichard, Lucas, 2020. "Rational inattention and migration decisions," Journal of International Economics, Elsevier, vol. 126(C).
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    Cited by:

    1. David G. Blanchflower & Alex Bryson, 2023. "Recession and deflation?," Review of Keynesian Economics, Edward Elgar Publishing, vol. 11(2), pages 214-231, April.
    2. David G. Blanchflower & Alex Bryson, 2023. "Were COVID and the Great Recession Well-being Reducing?," NBER Working Papers 31497, National Bureau of Economic Research, Inc.
    3. Blanchflower, David G. & Bryson, Alex, 2023. "Labour Market Expectations and Unemployment in Europe," IZA Discussion Papers 15905, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    Great unemployment; recession; consumer expectations;
    All these keywords.

    JEL classification:

    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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