As Economists See A Soft Landing, U.S. Bankruptcies Spike

As the U.S. economy has held up better than expected in the face of rising interest rates, some economists are starting to predict a soft landing, or even no landing at all for the U.S. economy. However, the yield curve remains inverted, bankruptcy rates are spiking and other leading indicators are moving in the wrong direction, which could suggest economic weakness despite a broadly encouraging read from the jobs data and stock prices.

The Historic View

Historically, rising interest rates have been associated with recessions. That’s one reason an inverted yield curve is a cause for alarm in financial markets. However, the U.S. economy has so far continued to grow as interest rates have risen sharply. That’s in part, due to a robust job market with unemployment remaining at low levels for longer than many expected. Still, based on how inverted the yield curve is, analysis from researchers at the New York Federal Reserve implies a 67% chance of a recession on a 12 month view as of June.