“The economy is showing signs of life,” advises David Malpass in today’s Wall Street Journal. “The U.S. economy may finally be in a position to accelerate above the so-called new normal—the painfully slow 2% average growth rate that has persisted since 2009,” the economist writes. His outlook is hardly unusual these days, but just 10 months ago in the same newspaper—in September 2012—he warned that “economic signals point to a 2013 recession.” He reasoned at the time that the then-current monthly declines in new durable goods orders and real personal income “waved bright red recession flags.” As we now know, the recession never came. In fact, as I’ve been discussing for quite a while now (including last week’s macro update), recession risk remains minimal. But how did Malpass (and, to be fair, a number of other economists) misread the macro signals late last year? Looking for an answer can help us decide what works, and what doesn’t, in the always-crucial task of estimating the odds for recession risk in real time.

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The rout in asset classes that took a bite out of prices in June has subsided in recent weeks. The losers on a year-to-date basis aren’t bleeding as much and the winners have mounted a modest revival this month. The range of returns is still fairly extreme, but the range is also a bit more skewed to the upside than we’ve seen recently, relatively speaking.

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