According to recent indicators, the possibility of a recession in the United States is becoming increasingly likely. Several key economic indicators have raised concerns among experts and analysts. One factor that has historically signaled an upcoming recession is the inversion of the 2/10 yield curve. This occurs when the yield on 2-year US Treasuries surpasses the yield on 10-year US Treasuries.
In March of this year, the 2/10 yield curve hit its peak inversion, reaching a 40+ year high. Historical data shows that a recession typically occurs around 6 to 9 months after this peak inversion. Based on this timeline, the data suggests that the recession is likely to start sometime between September and December of this year.
While some may argue that this projection is premature, it is important to note that every recession since 1969 has been preceded by an inverted yield curve. This consistent pattern adds credibility to the prediction. However, it is also important to remember that economic indicators are not foolproof and the future is never set in stone.
Another worrying indicator is the increase in permanent job losses. Throughout 2022, permanent job losses remained relatively low, but in 2023 there has been a steady upward trend. The latest data shows that permanent job losses Year-over-Year (YoY) have reached 18.9%. This rise in permanent job losses could be seen as a sign of an impending recession, as companies may be cutting back on their workforce in anticipation of a slowdown in economic activity.
Additionally, real yields on US 2-year Treasuries have risen to near the highest level since the beginning of 2009. This increase in real yields indicates that investors are demanding higher returns for investing in these shorter-term bonds. This shift in investor sentiment can be interpreted as a lack of confidence in the future economic outlook, further fueling concerns of an upcoming recession.
It is important to note that these indicators do not guarantee a recession. They are merely potential warning signs that economists and analysts use to assess the health of the economy. Other factors such as inflation, consumer spending, and global economic conditions also play a significant role in determining the likelihood of a recession.
While it is natural for people to feel impatient and anxious about the possibility of a recession, it is essential to maintain a balanced perspective. Economic cycles are a normal part of the business cycle, and the economy has shown resilience in the past. It is crucial for policymakers and individuals to remain vigilant and take appropriate measures to mitigate any potential negative impacts of a recession.
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