The New York Fed just released its latest "Probability of U.S. Recession Predicted by Treasury Spread," with data through September 2009, and the Fed's recession probability forecast through September 2010 (see chart above). The NY Fed's model uses the spread between 10-year and 3-month Treasury rates (3.28% spread in September) to calculate the probability of a recession in the United States twelve months ahead.

The Fed's model (data here) shows that the recession probability peaked during the October 2007 to April 2008 period at around 35-40%, and has been declining since then in almost every month. For September 2009, the recession probability is only 0.66% and by a year from now in September 2010 the recession probability is only .11%, or about 1/10 of one percent.

Further, the Treasury spread has been above 3% for the last five months (since May), a pattern consistent with the economic recoveries following the last two recessions. Finally, the pattern of the recession probability index so far this year (going below double-digits and declining monthly) is very similar to the pattern starting in March 2002 that signaled the end of the 2001 recession.

According to the NY Fed model, the chances of a double-dip recession? Zero