Stock market crashes, with Dow falling 22% in a day, triggering widespread recession fears.

Even with “more economists... saying that a recession either has recently begun or will do so within the next year”, our Long Leading Index correctly predicted continued growth, according to a story highlighted on the front page of The Wall Street Journal.

On February 6, 1990, Geoffrey H. Moore forecast a recession based on our leading indexes, which began that July. On March 9, 1990, The Wall Street Journal highlights that call: “Geoffrey Moore, who at 75 years of age has had a hand in declaring many modern recessions, noted the...[leading] employment index has begun signaling recession.”

In retrospect, recession is widely blamed on accompanying oil price spike. NBER recession probability model fails to forecast it. Fed Chairman Greenspan says in August, “those who argue that we are already in a recession I think are reasonably certain to be wrong,” and in October, “[t]he economy has not yet slipped into a recession.”

Geoffrey H. Moore publicly calls the end of recession. That forecast was then featured in The New York Times. Recession ends in March, as officially recognized 21 months later by NBER.

Fed hikes rates the same day that we announce that our sharply rising leading inflation index “warns of higher U.S. inflation ahead.” Testifying to Congress, Fed Chairman Greenspan says “anything that Geoffrey Moore does I follow very closely, because he taught me Statistics 1 in college.” As our index keeps rising and the Fed keeps hiking rates the bond market suffers its worst year in history.

Following the rate hikes, Orange County goes bankrupt, having invested in a leveraged portfolio of mostly interest-sensitive securities — a strategy dependent on short-term interest rates staying low.

During Humphrey-Hawkins testimony on February 22, Fed Chairman Greenspan says, “[b]ecause the effects of monetary policy are felt only slowly and with a lag, policy will have a better chance of contributing to meeting the Nation's macroeconomic objectives if we look forward as we act... Thus, over the past year, we have firmed policy to head off inflation pressures not yet evident in the data. Similarly, there may come a time when we hold our policy stance unchanged, or even ease, despite adverse price data, should we see signs that underlying forces are acting ultimately to reduce inflation pressures.”

On April 10, 1995, we announce: “Leading Inflation Index Decreases Again.” On July 6 the Fed changes direction and announces a rate cut, stating: “As a result of the monetary tightening initiated in early 1994, inflationary pressures have receded enough to accommodate a modest adjustment in monetary conditions.”

“Sure, economic growth is slowing, but a recession? Forget about it, according to an index assembled by Economy.com, a forecasting firm.” — The Wall Street Journal, Sept. 2000

“Dozens of analysts, economists, industry CEOs, and technology buyers say a general tech-industry meltdown is highly unlikely.” — Business Week, October 2000

FOMC statement still states: “the risks continue to be weighted mainly toward conditions that may generate heightened inflation pressures in the foreseeable future.”

A month and a half after highlighting “inflation pressures” rather than “economic weakness” as the major risk in its official statement, the Fed starts cutting interest rates aggressively. But ECRI's leading indicators keep falling.

“[T]he latest readings are encouraging... [T]he Fed's growth projection implies a significant pickup in the second half. ... [C]onsumers are not retrenching in a way that could push the economy into a recession.” - Business Week, Feb. 2001

“In a survey in March 2001, 95% of American economists said there would not be a recession. One of the few exceptions was the Economic Cycle Research Institute (ECRI), an independent research firm, which that same month correctly forecast, on the basis of its leading economic indicators, that a recession was unavoidable.” The Economist

Following the attacks, many acknowledge the recession. But, in fact, the recession had begun six months earlier in March 2001, as officially determined in November 2001.

“We are forecasting slower growth in 2005 for three reasons. First, our model for forecasting GDP tells us that the 2004 increases in both oil and fed funds will slow growth in 2005. Second, the yield curve's significant flattening suggests slower growth. And third, on balance, the economy seems to be slowing, e.g., real GDP, employment and the svc PMI.” - Major Wall Street firm, Feb. 2005

Several top economists now use the term “tipping point” to describe the state of the economy, in effect forecasting recession, as Fed rate hikes and “a massive oil shock” are followed by a major natural disaster.

“Home sales unexpectedly rose and U.S. consumer confidence reached a four-year high, allaying concerns about a collapse in housing and pointing to sustained economic growth.” - Bloomberg News, Apr. 2006

“We disagree with the high estimates of U.S. recession probabilities. Both data and fundamentals point to a softer-than-recession landing, in our view. We're maintaining our 20% estimate of the U.S. recession probability for the first half of 2008. We lowered it from 35% on September 19 after the Fed's 50-basis-point cut.” - Bear, Stearns & Co. Inc., Dec. 2007

“In its fourth quarterly report of 2007, the UCLA Anderson Forecast holds steadfast to the basic tenet of a forecast they have been making throughout the year, that the national economy is not technically in a recession, nor is there a national recession on the economic horizon.” - Business Wire, Dec. 2007

The start of the recession in December 2007 was officially recognized a year later.

Lehman Brothers fails, setting off a global financial crisis.

During a CNBC interview Warren Buffett says that the economy “has fallen off a cliff,” after having written a New York Times op-ed in October 2008 titled, “Buy American. I Am,” concluding: “my money and my mouth both say equities.”

"There's no reason to think that this recession is going to end any time this spring or this summer," Ken Goldstein, an economist at the New York-based Conference Board, said. - Conference Board, April 20, 2009

The June 2009 recession end date is officially recognized in September 2010.

“[W]e can safely say that this barometer [from ECRI] is now signaling an 80% chance of a double-dip recession... Keep your eye on the -10 threshold, for at that level, the economy has gone into recession... only 100% of the time.” - David Rosenberg, June 2010

• Read more at Business Insider
• Read more on the Wall Street Journal Blog

Pundits Misconstrue ECRI's public data, ECRI rebuts misconceptions:
“When there really is danger of an imminent recession, [we will signal it]. But that hasn't happened yet.”

• - ECRI, August 2010
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