Recession Indicator

The unemployment rate measures the percentage of people in the labor force who are currently unemployed and actively seeking employment. When the unemployment rate is trending up, it's a sign of a weakening economy. To check whether the unemployment rate is signalling a recession, it's often tested against the Sahm Rule. The Sahm Rule states that, "when the three-month moving average of the national unemployment rate is 0.5 percentage point or more above its low over the prior twelve months, we are in the early months of recession".

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The yield curve is a graph of bond yields by maturity date. Normally, longer-term bonds have higher yields because of the longer wait until maturity. When shorter-term bonds have higher yields than longer-term bonds, the shape of the graph becomes "inverted". This indicates investors see higher risk in the near term, usually resulting from the expectation of an economic downturn.

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Retail sales measures the total amount of money consumers are spending on finished goods. Consumer spending is a key economic activity. Increases in spending tend to lead to economic expansion. Decreases in spending tend to lead to economic contraction.

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The Consumer Confidence Index® measures consumer's optimism about the state of the economy and their personal financial situation. It's based on a monthly survey of 5,000 households that assesses their attitudes and expectations about current and future economic conditions.

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