- - Wednesday, August 28, 2019

“So please, bring on the recession.” That was a plea uttered during HBO’s “Real Time with Bill Maher” earlier this year. While publicly rooting for an economic downturn is rare and jarring, the notion seems commonplace when compared to media coverage of late.

Over the past week, the mainstream media has devoted considerable airtime and page-space to highlight the so-called “inverted yield curve” — or a scenario in which earnings from short-term Treasury bonds surpass earnings of long-term ones. They argue this is proof of an imminent recession.

“A possible recession? Treasury yields invert, sounding economic alarm bells,” proclaimed the Associated Press. “Recession Warning in Bond Market Sharpens,” reported The New York Times. “U.S. on the brink: Devastating recession imminent,” declared The Express.

However, when considering the full picture, predictions of prompt economic doom seem little more than political hot air.

To begin, it’s important to put the inverted yield curve into context. Yes, over the past four decades, an upside-down yield curve has seemingly preceded recessions. But there’s a catch. Inversions — or near inversions — also occur without economic downturn.



For example, the yield curve remained relatively flat during the 1990s and even flipped upside-down for a short time in 1998 — happening without larger economic consequence. In other instances, while recession did follow, an inverted yield curve predated a downturn by multiple years. So was it truly a precursor or simply a coincidence?  

This isn’t to downplay the indicator as a useful economic signal — it provides a wealth of interesting information. I simply argue it’s not the end-all-be-all barometer of economic stamina.

The strong fundamentals of the current economy should help quell fears of an impending recession.

The unemployment rate has been at or below 4 percent since March of 2018 and is currently sitting at 3.7 percent — a near five-decade low. At these rock-bottom levels, for all intensive purposes, the labor market has reached full-employment — an environment where everyone who wants a job has one. As a result, wage levels continue to rise.

Of similar note, jobless claims — weekly data measuring the number of Americans filing for first-time unemployment benefits — remain well-below the levels leading up to the previous recession. In fact, for a week in April, jobless claims dropped to their lowest level since October of 1969.

Moreover, consumer spending and retail sales continue to perform well, an indication that Americans feel confident about personal finances. In June, U.S. consumers spent $13.7 billion, a 2.5 percent year-over-year increase when controlled for inflation. Similarly, year-over-year monthly retail sales are up my more than 3 percent.

In short, when considering a wider scope of economic indicators, it’s evident the U.S. economy is on solid footing and there’s little chance of an immediate nosedive. Some politicians and their supporters in the media will simply stop at nothing to explain away the strength of the U.S. economy for political gain.

Reliable economic warning signs should never be ignored. However, over-inflating the significance of a single indicator while failing to take into account the larger economic landscape is unwarranted. 

As the folk tale, “Chicken Little,” taught us: Don’t allege the sky is falling when clear skies lie ahead.  

• Elaine Parker is the president of the Job Creators Network Foundation.

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