## Oregon Recession Probabilities

Smoothed Recession Probabilities for Oregon

Release Date: January 31, 2014

Most Recent Probability Available: December 2013

For a time series of smoothed probabilities back to February 1979, select one of the following:

[Figure] [Excel file]

1) How are these probabilities calculated?

Monthly smoothed recession probabilities are calculated from a markov-switching model applied to the Oregon coincident index of economic activity produced by the Federal Reserve Bank of Philadelphia (http://www.phil.frb.org/econ/stateindexes/index.html). Note that this index is tilted heavily toward labor market variables and the recession probabilities reported here are thus best thought of as probabilities of labor market recessions. For further details on the construction of this coincident index, see:

Crone, T.M. and A. Clayton-Matthews, (2005), "Consistent Economic Indexes for the 50 States", Review of Economics and Statistics87(4), pp. 593-603.

For details on the markov-switching model used to construct the probabilities, see:

Owyang, M.T., Piger, J.M. and Howard J. Wall, (2005), "Business Cycle Phases in U.S. States," Review of Economics and Statistics87(4), pp. 604-16.

2) What is a smoothed recession probability?

A smoothed recession probability is based on the most recent data available, and is thus potentially influenced by data that wasn’t available the first time a recession probability for a particular month was calculated. Smoothed recession probabilities will be revised over time as additional data becomes available, and as initially released data is revised. The effect of these revisions is to “smooth” away some of the spikes in the recession probabilities that occur in real time.

By contrast, a “real-time” recession probability is the first probability of recession that one could obtain for a given month. Note that the most recent smoothed probability is also a real-time probability.

3) When are the recession probabilities updated?

Recession probabilities are updated each time the Federal Reserve Bank of Philadelphia updates the coincident indices, which is approximately three weeks following the end of the month for which it is measured.