NPR\u2019s show today<\/a> has a long segment on recession detection and prediction.<\/p>\n I learned a lot about TikTok, Lady Gaga, wasabi peas in bars, babysitter buns, etc. Some talk about Sahm rule, term spreads and yield curve inversions, as well as the Conference Board LEI.<\/p>\n Figure 1:<\/strong> 10yr-3mo spread (blue), 10yr-2yr spread (tan), 1yr-Fed funds spread (green), all in %. NBER defined peak-to-trough recession dates shaded gray. Source: Treasury, Fed, NBER, and author\u2019s calculators.<\/em><\/p>\n It\u2019s a little embarrassing that one of the hosts, Kenny Malone, mentions \u201cmy\u201d model; it\u2019s really Cam Harvey\u2019s (1989)<\/a> model (personally I think \u201cmy\u201d model as a term spread augmented with debt-service and foreign term spread, per Chinn and Ferrara<\/a> and Ahmed and Chinn<\/a>). In Figure 1, show the 10yr-3mo and 10yr-2yr spreads which are conventionally used, as well as the 1yr-Fed funds spread, which Miller (2019)<\/a> identifies as the maximal AUROC spread at 2 months lead.<\/p>\n The 1yr-Fed funds spread dove in April (troubling), but was much more negative in September 2024 (comforting).<\/p>\n Anyway, a really entertaining piece which delves into lots of interesting correlations involving recessions.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n<\/p><\/div>\n![\"\"](\"https:\/\/econbrowser.com\/wp-content\/uploads\/2025\/05\/termspreadspix.png\")
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