Last week, I gave my annual economic forecast for 2023 at Augusta University. For those who were unable to attend, I discussed three indicators of recessions.
First, the yield curve is indicating a national recession. Interest rates on long-term government securities are currently lower than on short-term securities. As shown in the graph below, the yield curve has inverted prior to each of the last four recessions. An inverted yield curve means that investors are expecting lower short-term rates as a policy response to recessionary pressures.
Second, the availability of search inquiries on Google has allowed real-time access to consumers’ concerns. Searches for “recession” peaked in the summer. This was true whether looking at national, Georgia, or Augusta residents. Searches for “recession” are currently running at about 20 percent of their levels in the summer.
Finally, the Augusta Leading Economic Index (LEI) is a composite index of five economic indicators that lead the real business cycle. Residential building permits, while highly variable month to month, have generally been increasing over the last two years. Unemployment insurance initial claims increased between May and September, but the latest data for October showed a decline. The stock market has shown a small rally since the beginning of October and the inflation rate has started to decline since the summer.
Against these positive trends, job openings have been declining, although there is still over one job opening for every unemployed person. Overall, the Augusta LEI showed an improvement in October.
Overall, the economic indicators are sending mixed messages. Although the yield curve is indicating a national recession, the local indicators are not saying the same thing.