Thread by @bencasselman

Growth is slowing. The yield curve is inverted. The Fed is cutting. That must mean ... a recession is coming!

Well, sure. Eventually. The key is knowing when. Here is my guide to the numbers to watch:
nytimes.com/2019/07/28/bus…

1. The unemployment rate is a lagging indicator, but a reliable one -- even small increases are a recession signal. (h/t @Claudia_Sahm)
No sign of trouble here right now.

@Claudia_Sahm 2. The yield curve is inverted (and has been for a couple months). Historically, that's a very bad sign. But some economists think it matters less these days because of how the Fed's actions have affected rates.

@Claudia_Sahm 3. The ISM manufacturing index. We're not a manufacturing economy anymore, which means the ISM can fall below 50 without triggering a recession. But it's still a valuable indicator -- and below 45 or so, watch out.
(It's still just over 50 right now, though.)

@Claudia_Sahm 4. Consumer confidence. Ours is a consumer economy, so when consumers get nervous, it's a bad sign. What matters here isn't the level but the change. -- big year-over-year drops are bad news. (Right now it's about flat, but rate of change is trending down.)

@Claudia_Sahm 5. Grab bag! You should be looking at more than one indicator anyway. A few faves: Quits rate, temp staffing, building permits, housing starts. But plenty more you could add to that list.

@Claudia_Sahm OK, but why should you listen to *any* of this. Economists, after all, are lousy at predicting recessions. As @TaraSinc told me, "The dream of an early warning system is still a dream that we’re working on.”

But it's not that recessions routinely catch economists totally off-guard. Usually they saw the risks, but assigned the wrong probabilities (esp. more than a few months out). So these indicators have value if viewed with appropriate skepticism.

What's the big takeaway here? Most of these indicators suggest recession risks have risen but that a downturn isn't imminent. But they disagree about just how concerned we should be.
nytimes.com/2019/07/28/bus…

That helps explain why the Fed is cutting rates this week despite a seemingly healthy economy. See @jeannasmialek's analysis here:
nytimes.com/2019/07/28/bus…