Yield Curve Less Inverted, But Recession Warning Remains

After inverting on most measures in mid 2022, the predicted U.S. recession that an inverted yield curve often warns of, has not occurred. Since July, the degree of inversion has lessened, but there is still concern of economic pain ahead. That said recent economic data such as September jobs data, with over 300,000 jobs added, and Q3 Gross Domestic Product growth, at over 2%, has been reassuring that a U.S. recession is not imminent.

A Recession Signal

In the generally unreliable world of macroeconomic forecasting, the yield curve has a better track record than many alternative metrics. Historically, an inverted yield curve has often meant a recession is coming in about a year or so. Historically, this metric has generally predicted U.S. recessions with few false positives.