Abstract: Measures of regional economic sentiment, extracted from the Beige Book using natural language processing methods, consistently delivered reliable real-time forecasts of US recessions from the mid-1980s through the COVID-19 pandemic recession. Since then, recession risk probabilities have been choppy, with several false alarms. We attribute this unreliability to a post-2021 disconnect between measures of economic activity and the sentiment of business and community leaders.

Paper: https://www.clevelandfed.org/publications/economic-commentar... | https://www.clevelandfed.org/-/media/project/clevelandfedten... [pdf] | https://doi.org/10.26509/frbc-ec-202513