ACTV - Staking A 'Claim' With Inverted Curves

2024-07-02 15:05:00 ET

Summary

• The U.S. economy has not entered a recession despite the inverted yield curve, which historically predicted recessions, and this may be due to the relatively solid labor market setting.
• The monthly Employment Situation report and the initial jobless claims series are crucial indicators for the money and bond markets, as well as for the Federal Reserve.
• The current level of new jobless claims is significantly lower than the levels prior to the past four recessions and the average level of claims over a 40-year period, indicating a relatively strong labor market.

Remember when an inverted yield curve used to predict recessions? Here we are about two years removed from the Treasury yield curve moving into negative territory, and the U.S. economy has yet to move into recession territory. The economy’s resilience has certainly been a surprisingly welcome development and has left many a market participant wondering what happened. Indeed, history has shown us that the track record of inverted yield curves predicting a recession was almost foolproof. Now, I certainly don’t want to put a whammy on things, but if you’re wondering why an economic downturn has yet to occur, perhaps you don’t need to look any further than the relatively solid labor market setting....

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