Study: There’s A 70 Percent Chance A Recession Hits Within Next 6 Months
Worried about the next recession hitting sometime soon? Your gut instincts may align with what researchers say about the chances of an economic downturn happening in the next six months.
According to a new study from MIT’s Sloan School of Management, alongside State Street Associates, found that there’s a 70 percent chance a recession could happen within the next six months.
Oddly enough, the study used a measurement that was originally used to measure differences in skull sizes — the Mahalanobis distance. The measure has other mathematical applications, and researchers determined it was appropriate to use in order to predict if a recession would occur sometime soon, CNBC reported.
The study analyzed four different market factors using the Mahalanobis distance — industrial production in the U.S., nonfarm payrolls, the stock market, and the slope of the yield curve for Treasury notes.
Comparing data over the past 104 years, the study determined when those four measures collectively reach a certain threshold, it makes it more likely that a recession will be seen.
There's a 70% chance of recession in the next six months, new study from MIT and State Street finds https://t.co/RmQC46BBzE
— CNBC (@CNBC) February 5, 2020
If a recession seems more likely to occur at this moment than not, the economy isn’t showing signs of it at this moment. The January jobs report, which came out late last week, found that 225,000 jobs were added last month, defying expectations. Economists had guessed that only 160,000 jobs would be created that month.
January’s numbers were the second-highest job totals seen in the past 12 months, according to reporting from CNN. The unemployment rate rose ever-so-slightly, though still at a low rate of 3.6 percent.
Americans’ views on the economy are trending on the more optimistic. About 33 percent say that things are getting better in terms of economic growth, according to an Economist/YouGov poll this month, while just 25 percent say things are getting worse. About 27 percent say things are likely to remain the same as they are at present.