Who do you chose to believe?
Monday, 17 May, 2010 Leave a comment
The official unemployment rate was listed at 9.7 percent, but according to Williams’ models, the real number, including part-time employees and workers who have just given up in despair, is closer to a staggering 21.6 percent. The official February inflation rate was 2.1 percent; Williams argues that it’s really around 5.5 percent. And GDP for the fourth quarter of 2009 was not 5.9 percent, as the government claims, but 2.9 percent.
Williams says he’s just using math to tell you what you already know — that your economic life, and that of your friends, is much worse than the government’s numbers say.
This is the “party line” and remarkably, despite the scale of the failures in recent times, an expression that should strike fear into the heart of any right-minded person, is STILL in use – “this model uses…”:
Research beginning in the late 1980s documents the empirical regularity that the slope of the yield curve is a reliable predictor of future real economic activity. “Today, a substantial body of evidence exists from which various useful stylized facts have emerged,” said the Federal Reserve Bank of New York.
Importantly, this model uses the difference between 10-year and 3-month Treasury yields to calculate the probability of a recession in the U.S. twelve months ahead. The model has just been updated with data through April 11 and shows the probability of a recession for April 2010 and April 2011 to be 0.37% and 0.041% respectively (see table below). The model, in short, indicates an almost zero chance of a double-dip recession.
Having said this, OECD data (including major developed and six large developing countries) show leading indicators having already peaked for this cycle. As long as the line remains above zero, there will still be positive growth, but not quite the V-shaped recovery forecast by many economists.