The Reliability of Recession Predictors
With unemployment hitting historic lows and the Treasury yield curve flattening, economists are considering when the next recession might occur. Kevin Kliesen recently examined the accuracy of both these indicators: He found that, historically, both have been reliable predictors of recession. Since 1969, the unemployment rate trough has occurred nine months before a recession began and a yield curve inversion averaged 10 months before. However, Kliesen warns that "wise economic analysts should examine many indicators rather than betting the farm on one or two." Read the full essay here.