Here are 7 recession indicators with perfect track records flashing warning signs

• Traditional recession indicators are flashing warnings despite the US economy's resilience.
• Unprecedented monetary and fiscal stimulus during the pandemic could be challenging these metrics.
• Whether or not they're right this time around, they're probably worth paying attention to.

It's a tough time to be a recession indicator .

The unusual nature of this business cycle, following unprecedented amounts of monetary and fiscal stimulus during the pandemic, is putting traditional recession gauges to the test. Many well-respected metrics are flashing warning signals despite the widespread view that the US economy is not yet in a downturn and is still likely to avoid a recession.

Maybe this time is, in fact, different, and even metrics with perfect track records currently signaling trouble will be wrong. But for the time being, it's worth taking stock of what some of these gauges are saying.

As Neil Dutta , chief economist at Renaissance Macro Research, said in a recent interview regarding the Sahm Rule triggering: "The historical record is the historical record. At a minimum, it should raise your concern dial meaningfully."

Below, we've compiled seven recession indicators that have not produced any false signals over the last several decades and are currently producing concerning readings.

The Treasury yield curve

We start with a classic: the spread between the 3-month and 10-year Treasury yields. Every time the 10-year yield has dipped below 3-month yield since at least the 1960s, the economy has gone into recession.

The spread is in its deepest inversion since the early 1980s.

Yield curve inversions like this typically happen when the Federal Reserve raises interest rates on the short-end above long-term yields. Demand for long-end bonds amid recession fears can also send their yields down, contributing to the inversion.

The Conference Board LEI

Another classic: the Leading Economic Index from The Conference Board. The index compiles indicators on manufacturing activity and sentiment, stock and bond market activity, consumer sentiment, and more. It was in recession territory for much of 2022 and 2023, and while it has improved, it still sits at "warning signal" levels.

The Sahm Rule

This one is a little newer than the first two, but has climbed to similar levels of notoriety since its creation by Claudia Sahm in 2019.

The Sahm Rule says that the US economy is in recession in real time when the unemployment rate's 3-month moving average rises 0.5% from its lows over the previous year. It hit 0.53% in early August, but Sahm said she believes it's delivering a false positive because she doesn't think the US economy is in a contraction yet. However, things are trending for the worse, she has said.

Kantrowitz Rule

This rule gets at the same principle as the Sahm Rule. Developed by Piper Sandler's Michael Kantrowitz, it says that when the number of unemployed persons rises by at least 10% year-over-year, the economy is in recession.

Sahm Rule+

Right after the Sahm Rule triggered in August, researchers Pascal Michaillat and Emmanuel Saez published amendments to the model to consider demand for labor via job openings. Adding that in, they deem the economy is in "possible recession" territory. Still, current levels of the indicator are consistent with every prior recession since 1960.

The ultimate labor market recession indicator

This gauge from fund manager John Hussman compiles multiple labor market indicators, including Sahm's and Kantrowitz's. It also slightly increases the recession threshold for each indicator to make it more conservative and reliable. In recent weeks, it has hit the starting point of recessionary levels.

Manufacturing activity

While manufacturing activity alone may not be the best recession indicator due to the fact that it makes up just over 10% of GDP, it can also be a good gauge on consumer demand. For this indicator, Hussman compiles data from Fed and ISM manufacturing surveys. Over the last year or so it has been moving right alongside the doorstep of the recessionary zone.

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