Recession Alert
Guides
Recession Alert is a diffusion count: how many of eleven US indicators are flashing recession, tracked monthly since 1971. US downturns drive global risk-off, which is why a South African product carries it.
Reading the count
- Expansion: 0 to 2 active. Most indicators healthy.
- Warning: 3 or 4 active. Several flashing.
- Recession: 5 or more. In the backtest, five has marked every US recession since the 1970s.
Six indicators are coincident (are we in it now) and five are leading (is one coming). Each trips on its own latest monthly print, and the small month tag beside each row says which month that is, so the eleven are rarely all from the same month.
The eleven, with their thresholds
| Indicator | Group | Flashes when |
|---|---|---|
| Nonfarm payrolls | Coincident | Six-month change below zero |
| Real income less transfers | Coincident | Six-month change below zero |
| Industrial production | Coincident | Year on year below zero |
| Real manufacturing and trade sales | Coincident | Six-month change below zero |
| Sahm rule | Coincident | At or above 0.50 |
| Chicago Fed activity index, 3-month average | Coincident | Below -0.70 |
| Yield curve, 10-year minus 3-month | Leading | Below zero |
| Building permits | Leading | Year on year below zero |
| Credit spread, Baa minus 10-year | Leading | Above a threshold fixed on the training period |
| Financial conditions (NFCI) | Leading | Above zero |
| Initial jobless claims, 4-week average | Leading | Year on year up more than 10% |
Track record
Backtest, against every US recession since 1971 with the period from 2000 held out: the five-indicator trigger caught 93% of recession months out of sample, with a single false alarm since 2000. Past backtest results do not guarantee future results. The history chart on the page plots US GDP growth against the count so you can see the same thing for yourself.
Free sees how the alert works and the shape of the history. The live count, the state and the indicator table are Pro. Pro can also follow the State change alert bell, which sends one message when the state moves.
Past performance does not guarantee future results. Trading and investing involve significant risk of loss. Nothing on this page is financial advice or a recommendation to buy or sell any financial product. Everything on the platform is identical for every subscriber on a plan and is never tailored to an individual.