I’ve been closely monitoring several recession indicators that have historically aligned with past recessions:
Yield curve inversion: Historically, when short-term interest rates exceed long-term rates, recessions typically followed within 6-18 months. This indicator has preceded every recession since 1980, and we’ve recently seen this pattern emerge again.
Rapidly rising unemployment claims: A 15%+ increase in weekly jobless claims over a three-month period often typically signals brewing economic trouble. Watch this data point carefully, as it can shift dramatically once companies begin workforce reductions. Jobless claims jumped 60% from February to March this year…
Manufacturing contraction: When the Purchasing Managers’ Index (PMI) falls below 50, it typically indicates manufacturing shrinkage that has preceded every recession in the last four decades. Historically, a drop below 45 has been particularly significant as a warning sign.
Consumer spending slowdown: Retail sales and personal consumption make up nearly 70% of the US economy, making this a crucial indicator. Q1 2025 saw the first quarterly drop in consumer spending since the pandemic.
Declining economic activity: A common rule of thumb is that two consecutive quarters of negative GDP growth indicate a recession. GDP dropped by 0.3% in Q1, the first drop in 3 years.
If you’re concerned about a looming recession, you could consider diversifying your savings with gold. In each of the last three recessions, gold has not only maintained its value but appreciated significantly.
Please don’t hesitate to reach out to us with any questions you may have.
May you be safe and well during these uncertain times.
Todd Sawyer, Director of Client Education
Colonial Metals Group