Part 5/8:
Beyond just the slope of the yield curve, initial jobless claims—those filing for unemployment benefits weekly—serve as another potential recession predictor. Historically, a correlation exists between jobless claims and yield curve movements, indicating that initial jobless claims typically rise in tandem with a steepening yield curve.
As of now, initial jobless claims have remained unusually strong and have not mirrored the recent steepening of the yield curve. This discrepancy may lead us to one of two potential scenarios:
- Scenario A: Jobless claims do not rise, and the yield curve reinverts, delaying recession forecasts. This happened briefly in 1999 and 2006 when the yield curve steepened despite strong job market indicators.