The yield curve is the only economic indicator pointing to a recession, according to Credit Suisse.
Credit Suisse created a "recession dashboard" in which the firm tracked the state of certain economic indicators at the start of each recession dating back to 1973.In past recessions, indicators like inflation trends, job creation, credit performance, ISM manufacturing, earnings quality and the housing market were all recessionary or neutral, while the current state of the economy is telling a different story.
"Key signals such as labor and credit trends remain quite healthy," said Credit Suisse chief U.S. equity strategist Jonathan Golub in a note to clients Tuesday. Last week, the U.S. bond yield curve inverted, a phenomenon that historically presages a recession. That was the only one of the 7 major indicators Credit Suisse tracks to signal a downturn. In past recessions, indicators like inflation trends, job creation, credit performance, ISM manufacturing, earnings quality and the housing market were all showing weakness.
The labor market is strong with the total labor force hitting a record-high of 163.4 million, according to the Labor Department'sInflation and earnings quality are all "expansionary" indicators, according to Golub. Inflation is close to the Federal Reserve's 2% target and in the second quarter, nearly 75% ofTo be sure, despite the recession scorecard looking optimistic, Golub said, "recessionary indicators are more mixed than they have been since the financial crisis.
Manufacturing data, which is currently "neutral" on Golub's dashboard, has deteriorated meaningfully, primarily outside of the U.S., he said.to its weakest level in three years as trade worries weighed on business orders and the outlook for the overall economy.
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