How Did Leading Indicator Forecasts Do During the 2001 Recession?

The 2001 recession differed from other recent recessions in its cause, severity, and scope.
This paper documents the performance of professional forecasters and forecasts based on
leading indicators as the recession unfolded. Professional forecasters found this recession
a difficult one to forecast. A few leading indicators (stock prices, term spreads,
unemployment claims) predicted that growth would slow, but none predicted the sharp
economic slowdown. Several previously reliable leading indicators (housing starts,
orders for new capital equipment, consumer sentiment) provided no early warning
signals. When combined, the leading indicator performed somewhat better than a
benchmark autoregressive forecasting model.