Timing an economic recession is never easy, as proved this past year. Despite just about all of the leading indicators of growth pointing to a slowdown throughout the year, the economy has continued to stay resolutely resilient. In response to a surprising number of queries from clients on this topic over the past week, in this report, we take a snapshot of where we are with regard to the main indicators that the NBER looks at when deciding the business cycle dates, and what some of the more forward-looking data is showing.
As we near year-end, the coincident economic data, and data used by the NBER recession dating committee, continue to show that the economy has defied earlier expectations and is still very much in expansion mode. Nevertheless, slightly more forward-looking data such as the Sahm Rule is now flashing amber, suggesting that the economy is starting to flirt with recession. Meanwhile, the most forward-looking indicators—including the Treasury yield curve and the Conference Board’s LEI—are still flashing bright red, suggesting a high probability that the economy (and the NBER) will get a little cozier with the recession in the coming year and move from the flirting stage to getting down to actual dating.