Some say a US recession is around the corner — here's why that's hard to predict

Business Insider | 6/12/2018 | Ben Carlson, A Wealth of Common Sense
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A recession has happened in the US every decade since 1850.

As the economy heats up, some economists say a recession is on the way.

Recessions - Model

But recessions are hard to predict and model.

CNBC's Art Cashin recently stated on that every decade since 1850 in the U.S. has had a recession.

Great - Recession - Decade - Someone - Correlation

Since the Great Recession ended in 2009, that obviously means we haven't had one this decade. Someone who thinks correlation implies causation in these things would assume that means we're due for a recession in the next couple of years before the new decade hits.

I didn't doubt Cashin's stats but I had to dig into this one to see what the historical record shows:

US - Recession - Decade - California - State

It's true. The U.S. has had at least one recession every single decade since California became the 31st state in the union.

Looking at the data, what stands out is how volatile the U.S. economy once was.

End - WWII - Contraction - Activity - %

From the 1850s through the end of WWII, the average contraction in economic activity was more than 22%! Since WWII, the average contraction has been just -2.3%. The time in-between downturns have lengthened in this time as well.

Starting with the Millard Filmore presidency through WWII, the U.S. experienced a recession once every 2.5 years, on average. Since WWII, we've seen a recession once every 5.3 years, on average.

Great - Recession - Comparison - Panics - Yesteryear

The Great Recession looks tame in comparison to some of the panics of yesteryear. It's become easy to hate on central banks these days, but it's hard to argue that the Fed hasn't helped the U.S. economy become less volatile over time. The Fed doesn't control everything,...
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