Why do recessions always seem to catch everyone off guard?
Background
Business cycles are not periodic oscillations with predictable timing. They are irregular fluctuations driven by different shocks in different episodes, which is why no single forecasting model dominates.
The practical question is always the same: where are we in the cycle, what is driving the current phase, and how should policy respond?
What it covers
A business cycle is the pattern of expansion and contraction in overall economic activity. Expansions bring rising output, employment, and income. Contractions -- recessions -- bring the reverse. The NBER's Business Cycle Dating Committee defines U.S. recessions based on depth, diffusion, and duration of the decline.
Cycles are irregular. Expansions have lasted from 12 months to 128 months, and recessions from 2 months to 18 months since World War II. That irregularity is the reason forecasting turning points is so difficult and why economists track leading, coincident, and lagging indicators to read where the economy sits in the cycle.
Open question
Is the economy in expansion or contraction, what caused the turning point, and how broad is the slowdown across sectors and regions?