Warning Sign Patterns

Economists watch several indicators for early recession warnings. The inverted yield curve — when short-term bonds pay more than long-term ones — has preceded every US recession since the 1960s, making it one of the most closely watched signals.

Rising unemployment claims, falling consumer confidence, and declining manufacturing orders all flash warning signs. But false alarms happen frequently. As Paul Samuelson joked, the stock market has predicted nine of the last five recessions. Forecasting remains more art than science.