Predictions Hard, Especially About the Future

The CBO's latest projections see an economic slowdown that doesn't become a recession. The letter accompanying the projections also nicely encapsulates why you won't see me doing any macroeconomic forecasting (emphasis added):

CBO’s previous forecast, which was embodied in budget projections released in January, was finalized in early December 2007. However, data released since then––especially regarding the labor market––indicate that economic conditions are weaker than previously projected, and conditions in some segments of financial markets remain worrisome. Other indicators––such as production indices and information on retail sales and sales of new homes––also suggest a slowing in economic activity.

At the same time, changes in monetary policy have been more substantial than CBO assumed in December, and fiscal policy stimulus has been enacted. The Federal Reserve reduced the target for the federal funds rate by 125 basis points in January, and financial markets anticipate further easing in the near future. In addition, the Economic Stimulus Act of 2008 will provide about $150 billion in tax rebates and business tax deductions in fiscal year 2008. CBO anticipates that the recent monetary and fiscal policy actions will provide significant support to the economy in 2008.

Basically, one of the biggest determinants of whether or not there's going to be a recession is whether or not the Fed thinks there's going to be a recession. If they think it's likely, they'll act aggressively to avoid one and there likely won't be one. If they don't think there's going to be one, then there just might be a recession. At that point, though, in terms of accurate forecasting we're talking about mind-reading rather than economics.