Updating this post, probability of recession in April is 72%.

Figure 1: Estimated recession probability from probit regression on (final) Michigan Sentiment (blue), and on (final) Michigan expectations, News Sentiment, 1yr-FFR spread, VIX (tan). April data is for news through 4/20, interest rates and VIX through 4/24. NBER defined peak-to-trough recession dates shaded gray. Source: NBER and author’s calculations.

Notice there are two false positives in this sample period – 1998, and 2011. (I tried dropping the VIX, which leads to 45% probability in April, but has two false positives, in 1998 and 2023.)

The prediction is based on this regression, assuming no recession starting by March 2025:

To highlight the extent of the drop in sentiment and expectations, here is a picture of the two series over the last six years.

Figure 2: University of Michigan Survey of Consumers Sentiment Index (blue), and Expectations (tan). NBER

Keep reading this article on Econbrowser Blog - James Hamilton & Menzie Chinn.