ECONOMIC CYCLE RESEARCH INSTITUTE
NEWS & EVENTS
An Unrivaled Track Record
ECRI | Jul 18, 2022

First, let’s be clear on just what constitutes a recession. It isn’t simply two down quarters of GDP, which is neither a necessary nor a sufficient condition for recession. Some might say that’s a distinction without a difference. Nothing could be further from the truth.

A recession is a self-reinforcing downturn in economic activity, when a drop in spending leads to cutbacks in production and thus jobs, triggering a loss of income that spreads across the country and from industry to industry, hurting sales and in turn feeding back into a further drop in production – in effect a vicious cycle.

That's why the definition of recession goes beyond GDP and must also include jobs, income and spending, all spiraling down in concert. This definition provides decision makers with a critical map of the territory within which they operate (see recession dates for 22 countries).

Turning to recession forecasting, the IMF concluded from a 63-country study that economists’ “record of failure to predict recessions is virtually unblemished.” Add in the relatively long periods without recession in recent decades – punctuated by the Great Recession of 2007-09, experiments with QE, and the 2020 Covid recession – and things get much trickier, especially for novice prognosticators whose only real-time recession experience is around the Covid crisis. This is the lay of the land in which many are declaring “recession” or “no recession.”

In contrast, our research group has been studying recessions for three generations, spanning a century. The first generation defined the business cycle, including recession. The second pioneered the development of leading indicators and composite indexes. In more recent decades, our generation has moved that work much farther forward than most appreciate, refining a repeatable process that has helped us establish an unrivaled track record.

In 2005, The Economist wrote, “ECRI is perhaps the only organisation to give advance warning of each of the past three recessions; just as impressive, it has never issued a false alarm.”

In January 2008, we promptly called the Great Recession, warning that a “Self-Reinforcing Downturn Has Already Begun.” That call was subsequently made public in March of that year. To appreciate how widely disbelieved our forecast was, please recall that, in June 2008, Fed Funds futures were pricing in over 100 basis points of rate hikes by year-end.  

Then, in April 2009, when the focus of the G7 meeting was global depression, we correctly went the other way. At the time, we were virtually alone in predicting the “End of Recession by Summer 2009.”

To dodge the difficulty of forecasting correctly, it’s been said that, “if you have to forecast, forecast often.” While we rarely forecast recession, and are almost always right when we do, our 2011 recession forecast fell short. The economy did experience a very sharp slowdown in 2012 – one of the worst ever seen outside of recession – but escaped outright contraction.

The Covid recession was a unique shock, as the economy was virtually shut down. And in mid-March of 2020, we explained on CNN that “A recession is increasingly unavoidable.” But by early April, our cyclical analysis made it evident to us that “[T]his recession will be extremely deep, very broad, but relatively brief,” as we explained in a timely op-ed. The subsequent surge in economic growth and stock prices caught many by surprise.

In May 2021, we called a cyclical downturn in U.S. economic growth, which has been underway for more than a year now. In December 2021, we explained on CNBC how this slowdown, combined with a Fed that was far behind the curve on inflation, made the proverbial soft landing unlikely. In May of 2022 – when most economists were still expecting a soft landing – we warned people in a CNN op-ed to prepare for recession that could begin as soon as this year.

The doubts about recession risk raised by agenda-driven “experts” is far from over, especially as the economy is still adding jobs. In contrast, ECRI is independent, allowing us to focus objectively on correctly calling cycle turns. With our array of leading indexes, repeatable process, and long institutional memory, we remain confident about our current call.

We also know that, having made it through 48 recessions, the United States will make it through this one too. But, given the inflation threat, navigating this cycle will be particularly challenging. This is the focus of our work with clients who must make business and investment decisions through the twists and turns of the cycle, so that, when others are still looking at the rear-view mirror, they will be ready to take full advantage of the recovery.

Review ECRI's current real-time track record.

For information on our professional services please contact us.

Follow @businesscycle on Twitter, LinkedIn and YouTube.