The key difference between our recession methodologies and the NBER’s is that we rely on
leading indicators to identify the end of a recession in real time, whereas the NBER prefers to
wait for confirmation from coincident and lagging data, following data revisions. The NBER pays
particular attention to personal income net of transfers, and payrolls. While payroll growth has
ticked up, net personal incomes are still falling (top-left chart). This shows we should not expect
the NBER to announce the recession’s end in the very near future.

Survey data suggests that economic activity has bottomed, but diffusion surveys, such as the
ISM, tell us only about breadth and very little about magnitude. Our soft and hard-data indices
capture both direction and magnitude and suggest that US economic and market stresses are
still at elevated levels and are yet to recede. This is unsurprising given over 20m Americans
continue to file for unemployment, which tells us that the economy is still in the process of
bottoming. This is confirmed by our main US leading indicator (last chart). The economy is
following a protracted U-shaped path and just because some data has bottomed does not mean
a sharp recovery is underway. A necessary but not sufficient condition for us to judge the US as
being out of recession would be a pronounced and protracted turn up in our leading indicator.

Source: Bloomberg, Macrobond and Variant Perception