Leading Indicators
The most reliable leading indicator is the slope of the Treasury yield curve. The slope is typically measured by the spread between the 10-year Treasury bond yield and the 3-month Treasury bill yield. An inverted yield curve (long-term rates lower than short-term rates) suggests a recession within the next year. Meanwhile, an upward sloping yield curve (long-term rates perhaps 1.0% or more higher than short-term rates) suggests a growing economy within the next year. I don't have a graph of the yield curve, but the spread is currently 3.33%, which suggests we are headed for a recovery.
New capital goods orders are a sign of a near-term recovery or decline. Here is the year-over-year percent change.
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgMZ5YGwxmZ1DuqCWNMhO-MuwztBy-J-l2MdmWecCKQAmPPkziWarrCtbW_TQ-PnG4jF_nMSAYKJUq4XKvOLfGODSx6TGxuTJHqVikgYOWQtVDjn4vbd4zHeBb33RQIosj5veiEOjdsC-8/s400/neworder-graph.png)
New building permits are another leading indicator. Due to the fact that we still have a housing bubble, I don't expect permits to turn around before the recession ends. Expecting housing to lead us out of this recession is like expecting technology to lead us out of the 2001 recession.
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjZmrvzsdE-at-uQLQbb7nh07FbqzYP8BVJg8eunbERzklGA34dq943nogclGhIJ2I2yQVtPB_x36H0N1B1l8TCFl4WOkFqZCoXi7uEUsMeYdb3NtBD7tNVpCKbCs0IN_lq_L6m34uo15U/s400/permit-graph.png)
Coincident Indicators
While leading indicators forecast the future of the economy and thus tick up before a recovery, coincident indicators reflect the current state and thus should not tick up until the economy is actually recovering.
Year-over-year non-farm payrolls are still dropping like flies.
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhm0Sgo2hoBG-nk80lcwraxjZGzedxtwgsmFSmctKln_XPTOuK3MZuW6kz2U5oimwAzijo7i3HePCQ0NhxOk_sh2G94XLr4-DuOK42vKmp-SJgmUKvDeVjzlPPg3o3GtKR1SM5ch3pxyf0/s400/payems-graph.png)
Year-over-year industrial production is still plunging.
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjLgY6BTaudku4_61Xw-qBbXSIyVnIoj8gTnSAJrvR_MBgUpsod9VI7mSrCuUHFw3GkjgHaC8JuyVvtp-Egaf0mHRDpws_JJEA6R89l6NTbU4uhGRvp_M_QaNTU3OfyfmfKmkGU_9SpBYk/s400/indpro-graph.png)
Yet the year-over-year change in consumer sentiment is surprisingly strong, probably caused by the recently rising stock market (or vice-versa).
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjjarTKrgCZmzOLq3yFXAMBEsvwabYMzMsS2fnpmX0tbIlIamV7yw0XpTA7Xaahodmm54UUPmIe9cPX0b53KgArKmd4RY91Jm9J__50dZwFG6PdCAOKU485cjY-XusuBn1ef62OaG5gnlg/s400/umcsent-graph.png)
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