Economic security

Wall Street's favorite recession signal suggests the economy is in trouble

Wall Street's favorite fortuneteller is telling an ominous story about the fate of America's economy.
The chance of a recession in the United States over the next 12 months climbed to 38% in August, according to a New York Federal Reserve model updated on Wednesday.
The closely-watched model, based on the US Treasury yield curve, is up sharply over the past year, now standing at the highest level since the Great Recession.
Economists and analysts get worried long before this recession prognosticator reaches 100%. That's because the NY Fed model never reached 50% before the last three recessions, including the 2008 meltdown.
"Anything over 30% is very bad," said Nicholas Colas, co-founder of DataTrek Research. "A lot of things have to go right to avoid a recession. We need a trade deal."
The yield curve measures the gap between long and short-term bond rates. During normal times, it's more expensive for the government to borrow for a long time than shorter durations. But that relationship has been flipped upside down lately. So-called inversions have occurred before previous recessions.