Wednesday, June 12, 2019

Is Washington State heading into recession?

Back in 2017, I looked at Washington State's unemployment rate to see if Seattle's minimum wage laws had impacted employment. However, I haven't checked back in with that forecast since that time and when I did, there appears to be a spike in unemployment. Is a recession brewing?

Click to enlarge. It doesn't quite reach the threshold for a recession. We have ╬┤log u ~ 0.16, not yet 0.17 — which in any case is the threshold for a national recession based on national data, not state data which fluctuates more. However, other data suggests there might be economic weakness in the West census region. Therefore, this seems like a good time series to monitor. (As a side note, Seattle's housing prices seem to have hit a hiccup.)

I ran a counterfactual recession shock and came up with something pretty uncertain:

Here's a zoom in to more recent data:

Of course, this is how the model looks early on in the process (see here for a version of this at the national level going through the Great Recession).

I'll continue to follow this — state unemployment rates for May come out in a little over a week on June 21st.


Update 21 June 2019

The latest data brings our error bands on the counterfactual down a bit, but the mean path is largely in the same place:

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