On the verge of a double-dip recession

If history is a guide, the odds that the American economy is falling into a double-dip recession have risen sharply in recent weeks and may even have reached 50 percent....

Over the last 50 years, every time that job growth has been as meager as it has been over the last four months, the economy has been headed toward recession, in a recession or in the immediate aftermath of one. From early 2010 through this spring, by contrast, employment was growing fast enough to make the economy look as if it were in a recovery, albeit a modest one....

Perhaps the best sign of how difficult it is to know the economy’s direction is that, as a group, the nation’s professional forecasters have failed to predict all the recessions since the 1970s, according to data kept by the Philadelphia Fed. In the last 30 years, the average probability they put on the economy lapsing into recession has never risen above 50 percent — until the economy was already in a recession.

The forecasters, on Wall Street and elsewhere, are not blind to economic change; they just tend to underestimate its severity. When the economy is on the verge of recession, the average recession odds from forecasters tend to rise to about 30 percent. There has been only one occasion, in 1988, when the chances rose above 30 percent and a recession did not follow....