Economic data has been weakening for weeks, culminating in a horrible Jobs report on Friday, August 2.

Treasury yields from the New York Fed, chart by Mish

US Treasury Yield Changes

• 2-Year: Yield on the 2-year US Treasury note declined 28 basis points (.28 percentage points) on Friday leading the plunge. In the last three days, the 2-year yield plunged nearly a half-point.
• 10-Year: Yield on the 10-year US Treasury note declined 19 basis points on Friday. In the last week, the 10-year yield plunged nearly a half-point, taking four days longer and more evenly spread out than the change in the two-year yield.
• 30-Year: Yield on the 30-year US Treasury note declined 16 basis points on Friday. In the last week, the 30-year yield plunged 43 basis points.

US Treasury Yield Spreads Daily

Steepening and Bigger Inversions?!

The long-end of the curve is more inverted (the long end yield minus 3-month yield is increasingly negative), while the long-end vs. the two-year yield dramatically steepened.

The 10yr-2yr spread is about to turn positive. The 30yr-2yr turned slightly positive on July 15 then dipped negative. The 30yr-2yr spread then turned positive on July 23 and is now the most positive since June 7, 2022.

Many view the yield curve steepening as a recession confirmation indicator, but the signal is not that reliable. However, the sudden steepening does add to other data that also suggests recession.

US Treasury Yields Daily

Why the Waterfall?

July 31: Small Business Employment Growth Is Now Negative (and What It Means)

ADP data shows year-over-year payroll growth is negative 88,000 for small corporations sized 20-49. Trends are negative in all but very large corporations.

August 1: The Manufacturing ISM Index Is Lower Than Every Economist’s Estimate

The ISM manufacturing report was a disaster from every angle, especially employment , production, and backlogs. Employment reading worst since June 2020.

August 1: Commercial Construction Spending Is Down 9 Consecutive Months

Here’s the kicker: It’s not office related. And the Census Department has heavy negative revisions to spending. Let’s investigate.

August 1: Intel Announces 15,000 Job Cuts, 15 Percent of its Workforce

Intel received $8.5 billion in Biden administration grants (Inflation Reduction Act) but announces massive layoffs and halts dividends due to a decline in revenue.

August 2: Unemployment Rate Jumps, Jobs Rise Only 114,000 with More Negative Revisions

The headline jobs number was much weaker than the consensus estimate of 180,000 and the unemployment rate rose 0.2 percentage points.

Recession Has Started

On July 8, I wrote Weak Data Says a Recession Has Already Started, Let’s Now Discuss When

I’ve seen enough. A recession has started. Let’s discuss starting with a very good indicator that has few false positives and no false negatives.

My follow-up post was on August 2.

August 2: The McKelvey (Sahm) Unemployment Rate Recession Rule Just Triggered

A recession indicator based off rising unemployment triggered in July. Claudia Sahm, a former Fed economist, takes credit for an indicator she did not invent. Let’s discuss.

Weakening data explains the recession call. Yield curve action provides a confirmation signal.

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