Mr. Steven Kopits writes:
But by and large, VMT on a 12 mms basis turns a bit before or right at the start of a recession.
I take the not seasonally adjusted vehicle miles traveled series extending back to 1970 and define a 12 month moving average variable. I think define a dummy variable that takes a value of 1 whenever this moving average term turns negative. This is plotted as blue bar in the graph below, with NBER defined recession dates shaded dark gray:
Figure 1: Months when 12 month trailing moving average of VMT declines (blue bar), and NBER defined recession dates (dark gray bars). Source: DOT FHA via FRED, NBER and author’s calculations.
Using a one lag probit model, with negative 12 month trailing moving average of VMT dummy as a predictor, I predict recessions thusly:
Figure 1: Implied probability of recession using dummy variable