Concern about being on the edge of the next recession was heightened recently with a weak national jobs report. What do economists think? Have their concerns about the next economic downturn increased? NC State University economist Mike Walden responds.
“Well, let me talk about two leading indicators: One is manufacturing production, and we are concerned there. We have seen a downward trend since late last year in manufacturing production. A little bit of a rebound recently, but not back where it was. Manufacturing tends to be a leading indicator. People will buy manufactured products, both businesses and consumers, if they are optimistic about the future. They won’t if they are not. So we do have to keep an eye on manufacturing production.
“On the other hand, something in the financial sector called the yield curve is not flashing ‘recession.’ Now what the yield curve means is it looks at short-term interest rates, long-term interest rates. Typically short rates are much lower than long rates than lower because there’s more risk in lending long. However, that can get reversed, where short rates are higher than long rates. That has been a very, very good predictor of an imminent recession. Right now, that’s not happening. We have a normal yield curve, so that is not flashing ‘recession.’
“So right now I’d say no recession around the corner. But always, always these indicators bear watching.”