On January 7, 2026, Federal Reserve economists Hie Joo Ahn, Yunjong Eo, and Lucas Moyon released a FEDS Note that uses a Bayesian Markov‑switching model to assess U.S. recession risk at national and state levels. The model distinguishes between full‑recovery (U‑shaped) and lasting‑damage (L‑shaped) recessions. Historical analysis shows most pre‑COVID downturns produced some hysteresis, whereas the pandemic recession is classified as U‑shaped with a low probability of lasting damage. National recession risk has remained low in recent years, but state‑level probabilities reveal pockets of concern, especially in New England, New York, and New Jersey. Other macro indicators—initial unemployment claims, the yield‑curve slope, and credit spreads—also suggest a low probability of an imminent recession. The note concludes that close monitoring of regional conditions remains important.
https://www.federalreserve.gov/econres/notes/feds-notes/assessing-recession-risks-with-state-level-data-20260107.html
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