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Recession – Yes or No?

The debate surrounding recession and soft landing continues.  Mind you, professional economists are notoriously bad at predicting recessions.  Why would we be any better?  However, even if you can’t predict a recession, you can at least examine the data and determine if one is within reason based on that data.  We highlight a few items below and discuss their meaning and how historical economic data stacks up to the current economic scenario.  These four indicators are examined: ten-year treasury, inflation, gross domestic income, and unemployment.

The 10 Year Treasury Yield

1966 to 1973

Yields began advancing about three years in front of the 1970 recession.  Currently, they began advancing in 2021.  It takes time for rising interest rates to impact the economy.  Commercial loans that usually adjust every one to two years are now just beginning to adjust up to 5% more than previous rates.  The cost of debt has risen for all borrowers and takes time to have an impact.

2018 to Present


In late 1967 inflation began to rise a full three years in advance of the 1970 recession. Inflation, while it has peaked in the current environment began rising about three years ago.

1968 to 1972

2018 to Present

Gross Domestic Income

This is a lesser-known economic indicator.  Most look at Gross Domestic Product.  GDI, or Gross Domestic Income, offers a different approach to gauging a nation’s economic performance. It tallies the combined earnings of all production elements—such as labor, capital, and land—within the nation’s boundaries. This measure encompasses earnings like wages, profits, and rents that arise from the creation of goods and services.

1964 to 1975

GDI began declining 3 years in advance of 1970 and currently, GDI has started declining in late 2021.  I am excluding the pandemic as that was more of an exogenous event driven decline.

2015 to Present


This one is the current news theme.  Most outlets are touting that employment is solid.  I agree but as you can see the recession in 1970 as well as many others begin when unemployment is low and rises throughout the recession peaking at the bottom.  If the concluding chart is correct below, I wouldn’t anticipate unemployment rising until early 2024.

1964 to 1976

2015 to Present

Unemployment is the last shoe to drop in a recession scenario. In fact, it peaks close to the bottom of the recession.  GDP lags but GDI is more of a leading indicator much like the stock market.  Generally, by the time a recession has officially started the stock market has bottomed out and the fear level is close, if not at, its peak.  Advance retail and food sales on an inflation adjust basis peaked in April 2022.  The previous two recessions – 2000 and 2007 sale peaked about 15 months prior to the recession. 

The chart below shows that the probability of recession by November is north of 40% and advances to 80% by January 2024. It stays north of 70% through July of 2024. 

Forecasting is a dangerous business.  Those that live by the crystal ball are sure to break a little glass.  Ignoring the indicators though would be a mistake.  Make plans to protect yourself against it!  You don’t have to hide everything under the mattress but look around at whos’ over leveraged and is most susceptible to a downturn.  Take some risk off the table.  You’ll sleep better.