Haver Analytics
Haver Analytics

Introducing

Joseph G. Carson

Joseph G. Carson, Former Director of Global Economic Research, Alliance Bernstein.   Joseph G. Carson joined Alliance Bernstein in 2001. He oversaw the Economic Analysis team for Alliance Bernstein Fixed Income and has primary responsibility for the economic and interest-rate analysis of the US. Previously, Carson was chief economist of the Americas for UBS Warburg, where he was primarily responsible for forecasting the US economy and interest rates. From 1996 to 1999, he was chief US economist at Deutsche Bank. While there, Carson was named to the Institutional Investor All-Star Team for Fixed Income and ranked as one of Best Analysts and Economists by The Global Investor Fixed Income Survey. He began his professional career in 1977 as a staff economist for the chief economist’s office in the US Department of Commerce, where he was designated the department’s representative at the Council on Wage and Price Stability during President Carter’s voluntary wage and price guidelines program. In 1979, Carson joined General Motors as an analyst. He held a variety of roles at GM, including chief forecaster for North America and chief analyst in charge of production recommendations for the Truck Group. From 1981 to 1986, Carson served as vice president and senior economist for the Capital Markets Economics Group at Merrill Lynch. In 1986, he joined Chemical Bank; he later became its chief economist. From 1992 to 1996, Carson served as chief economist at Dean Witter, where he sat on the investment-policy and stock-selection committees.   He received his BA and MA from Youngstown State University and did his PhD coursework at George Washington University. Honorary Doctorate Degree, Business Administration Youngstown State University 2016. Location: New York.

Publications by Joseph G. Carson

  • Are we there yet? Incoming information on the economy tells policymakers they have not achieved economic conditions (below-trend growth and slack in the labor markets) to ensure inflation continues to slow. And that spells bad news for investors because policymakers have indicated that slowing inflation alone is not a sufficient reason to prevent additional rate hikes.

    At the July 25-26 FOMC meeting, policymakers stated that "a period of below-trend growth in real GDP and some softening in labor market conditions as needed to bring aggregate supply and aggregate demand into better balance and reduce inflation pressures sufficiently to return inflation to 2 percent over time."

    Tightness in labor markets has lessened somewhat, but a 3.5% jobless rate in July tells policymakers that they are far from a situation in which there is enough slack in labor markets to limit wage and price pressures.

    Yet, the economy's current growth performance is a more immediate concern to policymakers, especially after raising official rates over 500 basis points and expecting the lagged effects from higher rates to result in slower growth.

    GDPNow, published by the Federal Reserve Bank of Atlanta staff, offers a running assessment of current quarter GDP growth. The GDPNow model uses much of the same source data that BEA, the government agency responsible for estimating GDP. But GDPNow differs from the old GDP flash report, which BEA prepared because it does not use detailed or imputed data in the official estimates, so it can overstate and understate growth for any particular quarter. Nonetheless, it has credibility since a Federal Reserve Regional Bank published it.

    The latest estimate posted on August 16 shows Q3 GDP running at a 5.8% annualized rate, roughly three times above consensus estimates and far above what the Fed considers trend growth. The latest estimate only includes preliminary data for July, so two-thirds of Q3 economic activity is missing. Regardless of what's missing, it sends a message of strong and broad economic momentum in the early part of Q3.

    Even if the final Q3 growth number ends half as fast as the August 16 GDPNow estimate, it should tell policymakers the lagged effects of when rising official rates run below inflation are much less, or even non-existent, as when rising official rates are above inflation. And the current stance of monetary policy is even less restrictive than advertised, given the level of QE.

    So the level of official rates needed to slow the economy has yet to be reached, and whatever level policymakers or investors thought was appropriate should be raised by 100 basis points or more because of QE.

  • The July 12, 2023, WSJ article, " Measure It Differently, And Inflation Is Behind Us," triggered a lively debate on housing costs in the CPI. The WSJ article argues that "no one pays" the rent used to measure owners' housing costs, so it should be overlooked or ignored. No one liked the results when BLS included "actual" housing costs based on prices, so government statisticians, academics, and politicians collaborated to change it.

    So what is best, a CPI with no price for housing costs, a "fake" price, or an "actual" price? The answer is more than academic, as it will have significant implications for monetary policy and how the business cycle runs and ends.

    The main opposition to including the price of a house in the CPI stems from the view that housing is an investment item, disqualifying it from inclusion in the consumer price index. Yet, the CPI has other investment items (e.g., watches, jewelry, etc.). But since the weight of those items is small, their inclusion is not controversial. So is the housing issue, the investment angle, or the weight in the index? It appears to be the latter, as "consistency" in measurement takes a back seat.

    Critics also argue that people borrow money to purchase a house. So if the cost of a home, including financing costs, increases every time the Fed raises rates, housing inflation would rise, forcing the Fed to raise rates again and again. People borrow money and finance (credit cards, auto loans, etc. ) every good and service in the CPI, and these financing charges have significantly increased since the Fed raised the official rate. So why should housing financing be treated differently?

    A consumer price index, including house prices, does not necessarily mean a higher consumer price index. The consumer price index will yield the same result if house price increases match other items' average growth. Only if house price increases were significant and persistent would there be an impact on the CPI.

    The CPI, the government now publishes, has increasingly been enmeshed in the politics of the numbers. Printing a lower CPI than a higher one is more politically acceptable, even if that means including "fake" or "inaccurate" prices over actual prices.

    With house prices living outside the standard price index nowadays, it is impossible to ascertain the aggregate actual inflation rate in the economy. That makes the Fed's job on price stability more complicated. That's because setting rates for a price index without housing risks the real cost of credit too low for real estate. Fifty years ago, Professors Alchian and Klein authored a paper, "On a Correct Measure of Inflation, stating " a price index used to measure inflation must include asset prices." Their analysis and conclusion are still valid today.

  • The construction of the leading indicators has many flaws, but one of the more visible and bigger ones is the three series for new manufacturing orders. The leading index includes two dollar-based new orders series and one diffusion measure. A diffusion measure captures the breath of change, not the magnitude of change. In other words, it does not distinguish between the size of the gain or decline. Yet, dollar-based series are more important in determining economic growth since the economy runs on dollars spent.

    In May, the leading index fell 0.7%. The ISM new orders index posted the most significant decline (1.4%) of any indicator, overwhelming the small gain in the other two order series (0.1% and 0.2%, respectively).

    Today, the Census Bureau reported that new orders for durable goods, a dollar-based series, rose 1.8% in May. And excluding the volatile transportation sector, new orders rose 0.6%. The latest data will result in an upward revision to the dollar-based series in the leading index, but not enough to wipe out the negative contribution of the ISM New orders index.

    How can anyone trust the signal from the index of leading indicators when the dollar-based new orders for durable manufactured goods (excluding transportation) posted in May, their most significant gain in over a year, and yet the sum of the three orders series in the leading index is negative because of a sharp decline in diffusion-based series? The economy runs on dollars.

  • A research paper by the staff at the Federal Reserve Bank of Dallas (1993) claims that the composite index of leading economic indicators does not provide "reliable advance information on the direction of the economy." Other studies have found that nearly half of the cyclical peak predictions in composite indexes of leading indicators were false signals.

    The key takeaway from these studies, and others, is that the forecasting record of the composite index of cyclical indicators is not 100% accurate because the group of leading indicators that accurately predicted one cycle might not work in the next. In other words, as the economy moves from one business cycle to the next, the economy changes, as does the policy structure, and some indicators become obsolete and less reliable while others gain more predictive power.

    Forty percent of the economic series that comprised the leading index in the 1980s and 1990s, when the Dallas Fed paper was researched, are no longer included. Change is a recurring feature of the leading economic indicators. In the 2000s, a new way of measuring the Treasury yield curve became part of the index. After the financial crisis of 2007-09, the redesigned leading economic index included a leading credit series and the ISM new orders series, removing broad money and vendor performance.

    It's too early to conclude confidently that the current composite index of leading indicators sends accurate or false signals. But the performance of several indicators needs to be examined to avoid a wrong prediction.

    For example, the current leading indicators index includes three new manufacturing order series. That construction is not ideal as it is best to have indicators covering a wide range of activities and sectors to avoid the intercorrelation between economic indicators.

    Also, the current economic cycle has had unique features for the goods sector. Once the economy re-opened following the closures of businesses during the pandemic, there was a record surge in demand, especially for goods, driven by pent-up demand and unprecedented fiscal and monetary stimulus. Yet, firms could only respond slowly due to part shortages and supply chain bottlenecks. That forced firms to double and even triple ordering, resulting in the most significant (record) gains for manufactured consumer goods and capital goods (excluding aircraft). Now that the "ordering binge" has ended, the new orders series have reversed, especially for consumer goods posting monthly declines in five out of the past six months. That has contributed to the leading index's monthly decreases.

    Yet, is removing "double-ordering" a sign of economic weakness or a technical adjustment in the orders series? New orders for consumer goods are off their record highs but remain elevated and stand 25% above pre-pandemic levels. Meanwhile, new orders for capital goods (ex-aircraft) were at record highs in April. It's worth noting that unfilled orders, an indicator in an earlier version of the composite index of leading indicators, stands at a record high. New and unfilled orders raise questions about whether the economy is transitioning to a slower growth environment or an outright recession.

    Another questionable component of the current leading index is the yield curve, or the spread between the yield on the 10-year Treasury and the federal funds rate. The yield curve series was included in the leading index in the mid-2000s. But that was before the Fed embarked on quantitative easing (QE) or the purchase of long-date securities with the primary intent of keeping long bond yields lower than what otherwise would be the case.

    The current inversion of the yield curve is the widest on record, negatively impacting the composite index of leading indicators. It defies logic to think that the yield curve offers similar (leading) signals when the Fed buys securities and when the Fed does not. The Fed doubled its balance sheet to over $ 8 trillion during the past three years. The yield curve was added to the composite leading index in the mid-2000s, and the Fed balance was pretty steady at $750 billion, less than one-tenth of its current size.

    With QE as a new policy tool, comparing long bond yields to inflation makes more sense as it is a proxy for real interest rates and captures the intent of QE (i.e., keeping the long-term borrowing cost low). Replacing the yield curve with a proxy for real interest rates would dramatically alter the pattern of the composite of leading indicators.

    One cannot use Paul Samuleson's comparison of the stock market in predicting "nine out of the past five recessions" with the track record of the composite index of leading indicators because if the current composition of the index does not accurately predict business cyclical turning points, it will be refitted or redesigned with a group of indicators that does. Unfortunately, that does not offer any hope for investors because people make decisions in "real-time" and can't wait for data revisions or a new index. History painfully shows that using one set of cyclical indicators to predict the future is fraught with failure. That's not a criticism of using leading indicators to help predict cyclical turning points. Still, things are constantly changing in the economy, requiring more than a small set of indicators to predict the future.

  • The budget/debt ceiling negotiation ended like several others; a lot of drama but no fundamental change. The irony is that the primary goal of these negotiations, at the least from House negotiators, was to reduce the staggering debt load of the federal government. Yet, in the end, Congress again decided to vote for more debt, a lot of it, to pay for spending.

    The Congressional Budget Office (CBO) projects that the US will run budget deficits between $1.5 to 2.0 trillion per year for the next decade, adding nearly $20 trillion to the federal government's outstanding debt.

    Nearly two decades ago, CBO projected the US would run budget deficits in the $200 to $300 billion range, which alarmed former Fed Chairman Alan Greenspan. Back then, Mr. Greenspan stated, "When you begin to do the arithmetic of what the rising debt level implied by the deficits tells you, and you add interest costs to that ever-rising debt, at ever-higher interest rates, the system becomes fiscally destabilizing," he told lawmakers. " What would he say today?

    The impact of budget deficits on interest rates varies depending on economic conditions. Yet, huge budget deficits for the foreseeable future will occur as the Federal Reserve reduces its balance sheet, removing the non-interest rate-sensitive buyer that has held down interest rates in the past several years. Market interest rates will have to go much higher to attract private sector buyers, and it would not be surprising if ten-year yields rise 100 to 200 basis points over current levels in coming years.

    To balance the federal budget requires two things; first, cutting the entitlement programs, and second, raising taxes. Critics would argue against higher taxes, but balancing the budget with tax receipts equaling less than 20%-plus % of GDP (currently running at 18%) is impossible. And since individual tax payments represent a record 50%-plus of total taxes, while corporate tax payments are near a record low of 8%, business taxes are at risk of increasing.

    In the past decade, investors have benefitted doubly from Congress's decision to use debt instead of taxes to pay for record spending and the Fed's record purchases of debt securities. Yet, that era is over. The debt deal maintains record federal borrowing, but now without the Fed as a (buying) partner. Investors should expect higher interest rates as a result. And once the higher debt costs become fiscally destabilizing, as Greenspan noted, Congress must move on taxes, with business taxes the target.

  • The wage cycle is a critical factor in the scale and length of the Fed tightening cycle. Based on the current wage data, history says the tightening cycle has yet to reach its peak rate, and the duration of the higher official rate cycle could extend much farther than the markets expect.

    The thinking behind the Fed hiking rates to break the inflation cycle is straightforward: lift rates to a prohibitive high enough level that curtails or breaks the willingness to borrow and spend. Each tightening cycle is different, and the scale and length often depend on wage and income growth.

    One traditional way to determine if higher rates are prohibitively high is to compare them to inflation. That helps determine the real borrowing costs for businesses since the price is what firms get for their products and services. Yet, to measure the real borrowing costs for consumers, one needs to compare interest rates to wages since the latter is the worker's price.

    In April, and for the first time since the Fed started to raise official rates in March 2022, the gap between Fed funds and wage growth was closed. That's the good news. The bad news is that the tightening cycles of the late 80s, 90s, and mid-2000s ended when official rates were several hundred basis points over the wage growth. So history would say the Fed tightening cycle is far from over, and the April wage and jobs data lends credence to that view.

    Still, policymakers may pause and gauge the lagged effects from the scale of the tightening to date. Lagged effects from monetary tightening are adverse and build over time. Still, the overall stance of monetary policy must be tight or restrictive for them to generate the negative economic and financial results policymakers want to achieve.

    Up to this point, the policy stance shifted from less accommodative to neutral. That helps to explain why cyclical sectors (motor vehicle sales in April were the highest in nearly two years, and housing activity has perked up) showed renewed momentum. More rate hikes will be needed to break the momentum in cyclical industries.

  • In Q1, the combined output of the cyclically sensitive motor vehicles and residential housing sectors expanded by 1.3% annualized, slightly better than the 1.1% growth for the overall economy and the first quarterly gain since late 2021. Also, the Q1 data shows that operating profits gained sequentially quarter over quarter and year over year. The rebound in cyclically sensitive sectors and profit data run counter to the recession forecasts. All economic recessions have standard features; declines in cyclically-sensitive sectors and drops in operating profits. Those features are missing at this time.

    S&P purchasing managers manufacturing index rose over one percentage point to 50.2 in April. That’s the highest level in six months, driven by new orders, production, and employment gains. Thus, the rebound in cyclically sensitive sectors has continued into Q2.

    Recessions forecasts are linked primarily to the inverted yield curve and the decline in the leading indicators. Questions over the accuracy of the signal from the inverted curve stem from the Fed's new policy tool, quantitative easing (QE). Since the Fed now actively purchases substantial quantities of long-duration fixed assets to keep a lid, or even depressing, on long-term interest rates, how can the yield curve signal be as reliable as in prior periods?

    History shows that lower long-term borrowing costs often lead to faster growth in cyclically-sensitive sectors. The yield on the 10-year Treasury has declined 75 basis points in the past six months, and cyclically sensitive sectors have rebounded. Is that a coincidence, or are they interrelated? If the latter, the recessionary signal from the inverted yield curve is wrong. It’s the latter.

    The leading economic index, which has declined sharply over the past year, triggering fears of recession, includes the yield curve. Yield curve inversion has been a significant factor in the decline of the aggregate index over the past year. Yet, is the yield curve still a reliable leading indicator with the creation of QE?

    It’s common for the index composition to change from one cycle to the next because economic, financial, or policy changes make some indicators less reliable or obsolete. Broad money failed as an indicator before the Great Financial Recession. A new credit series replaced it in 2012. It will not be surprising if the leading index includes a QE series and removes the yield curve indicator at some point.

    It’s worth noting the 2020 recession was unique from the standpoint non-economic factors triggered it. Yet, the monetary and fiscal policymakers viewed it as a vast economic disaster, rightly so, and responded with the most significant monetary and fiscal stimulus ever seen. Doubling the Fed's balance sheet from $4 trillion to over $8 trillion in 18 months was never done before, and we still need to learn all the economic and financial consequences. At the very least, the aggregate stimulus and new ways of interjecting liquidity in the system raise questions over long-trusted indicators such as the yield curve and broad money.

    Investors should keep it simple; the economy is growing if companies generate profits and hire.

  • For the week ending March 15, bank lending to commercial, industrial, real estate, and consumers increased by $40 billion, following a slight increase of $10 billion in the prior week. The two-week increase was more than half the cumulative increase over the previous two months, January and February.

    It is far too early to assess the impact of additional changes in lending standards. But the early March lending data reflects the tighter lending standards and the rise in market rates over the past year. And even with those tighter lending and higher rate conditions, the banking system showed a willingness to lend and businesses and consumers an appetite for borrowing.

    A bank-driven credit crunch may eventually happen, and investors are betting something substantial will occur, given the sharp drop in yields. But a few things may mitigate its impact, if not limit, its duration.

    First, all the top commercial banks are well-capitalized and do not face any liquidity constraints. It is hard to see a broad, deep, and enduring credit crunch that does not involve the top banks.

    Second, the Fed's Bank Lending Program should ease mid-tier banks' liquidity issues, and that should limit any pullback in credit due to tighter standards. The program runs for an entire year.

    Third, market interest rates have dropped significantly, which could boost the demand for credit.

    It is instinctive for investors to rush to buy the safest and most liquid assets, even when there is a hint of a banking crisis. That's the playbook investors have used in prior financial crises. Still, a 125 basis points drop in two-year yields over a few weeks is far bigger than during the early months of the 2007-09 financial crisis. The economic and financial data must support that negative narrative on yields for them to stay.

    History has shown that the "price" of credit has been the main rationing factor for credit. And until the "price" of credit gets more expensive through market forces or Fed raising rates, any pullback in credit should prove to be "transitory."

  • The Fed looks at bond yields as a gauge of long-term inflation expectations and its overall policy stance. Policymakers believe moderate and stable long bond yields are consistent with well-anchored inflation expectations and an appropriately configured policy stance. Yet, questions surround the current signal from long-bond rates after a decade-plus-long program of debt security purchases (quantitative easing, known as QE) by the Federal Reserve.

    Studies have shown that QE has lowered long bond yields by several hundred basis points. But, it needs to be clarified if the anchoring of long-bond interest rates via QE has also changed how the market price of long bonds adjusts to official rate hikes. Whatever the effect is, the Fed is not getting the market response it needs if it believes that higher borrowing costs are the main channel to break the inflation cycle.

    The core inflation and long bond yield picture that Fed faces today is something they have not encountered since the mid-1970s. One has to go back to the mid-1970s to find a similar alignment between long bond yields and inflation. The core inflation rate is approximately 200 basis points over the ten-year Treasuries yield, and that alignment has been in place for more than two years.

    That alignment raises several issues, all pointing to higher official rates.

    First, market rates adjusted for inflation have moved from "super" easy to still easy, indicating that the public's borrowing costs are still not sufficiently high enough to break the inflation cycle. That means the Fed has to hike official rates much more.

    Second, an inverted Treasury yield curve with market borrowing costs below the inflation rate has never occurred before. If borrowing costs matter more, as history has shown, curve inversion does not have the same adverse economic consequences. Consequently, the Fed will need to raise official rates well above market expectations creating an even greater curve inversion to get the inflation slowdown its wants.

    Third, the most significant risk to investors is if remnants of QE have permanently broken the links between long-term market borrowing rates and official rates. That would open the door to official rates moving to levels not seen in several decades. The risk of this scenario is low, but not zero, as the Fed has never faced an inflation cycle with QE in place.

  • Quantitative easing (QE) is the "albatross" of the current stance of monetary policy. Quantitative easing was a monetary tool created during the Great Financial Recession. Operating at the "zero" bound of official rates, the Fed found a new channel (QE) to provide monetary stimulus and liquidity to the economy and financial markets. QE was a new way of making money as the Fed bought bonds directly from the financial markets in exchange for cash, increasing the broad money supply.

    The first quantitative easing program ran from 2009 to 2014. During that period, the Fed's balance sheet exploded to over $4 trillion from about $500 billion before the Great Financial Recession. The Fed started the second QE program when the pandemic hit. That boosted the Fed balance sheet to $8.8 trillion, more than twice the size after the first program.

    Several studies have concluded that the first QE program was the equivalent of several hundred basis points of additional official rate cuts. The second program was as big or bigger in scale, providing monetary stimulus worth several hundred points of Fed easing.

    Since QE never existed before, no one understands how this new tool would impact the effectiveness of monetary policy when policymakers tighten policy. But it should be symmetrical. That means as long as the scale of QE remains exceptionally large (Fed balance sheet still well over $8 trillion), it will probably take much bigger hikes, and to higher levels, in official rates for the stance of monetary policy to be as restrictive as when QE was not in place. (Note: If there are no negative consequences of QE it would then go down as the greatest invention in history)

    How else can anyone explain the exceptional strength of the labor markets and historic low unemployment rate, accelerating bank lending, resilience in the equity and bond markets, and high inflation rates after nearly 500 basis points of official rate hikes, the most significant increase for a single year since the early 1980s without linking it to QE?

    Remnants of QE are preventing the Fed from accomplishing its goal of reversing the inflation cycle. Risk assets should remain well-bid as long as the Fed fails to recognize the problem. But what happens when the Fed says they were wrong again?

  • Last month, although overall headline consume prices fell 0.1%, consumer prices for services rose 0.4%. Since consumer services account for 70% of the overall price index (and 58% excluding energy services), that's the price cycle the Fed needs to crack before it can be confident that overall inflation is slowing to its 2% target.

    Breaking consumer services price cycles take time and significant increases in official rates. Since the mid-1980s, consumer services inflation cycles have reversed after the federal funds rate exceeded the inflation rate, sometimes by substantial amounts. At the end of 2022, the Fed was far from reaching the level of official rates that broke prior inflation cycles.

    That's because consumer services, excluding energy services and core consumer services less shelter, posted year-on-year increases of 7% and 7.4%, respectively, in December. So the current fed fund rate range of 4.25% to 4.5% is still 300 basis points below consumer services inflation.

    The financial markets are betting that the Fed has little more to do to reverse the inflation cycle, while history says there is much more to do. Who's right? I bet the historical pattern between inflation and the fed policy repeats itself; investors, beware.

  • The inverted Treasury yield curve has raised concern over the risk of recession in 2023, and for a good reason. An inverted yield curve has occurred before the past eight recessions. Yet, something is awry. Banks are not restricting credit as they typically would with an inverted yield curve, and businesses and consumers are borrowing at banks at the fastest rate in fifteen years. What's up?

    The thinking behind the inverted yield curve is that banks slow and eventually stop lending when bank funding costs exceed what banks can earn by lending. Yet, bank credit has been accelerating throughout 2022. The latest data for November shows bank lending to businesses, real estate, and consumers rising 11.8% over the comparable period one year earlier. That's the fastest annual growth since 2007.

    Why are banks lending so much with an inverted yield curve? Banks' total costs of funds are not determined solely by the rate of federal funds. Customer deposits account for half of the funding costs for many big banks. And with customer deposit earning (or costing) less than 70 basis points, the bank's all-in funding costs remain relatively low. So it's still profitable to lend nowadays.

    That raises questions about the recessionary signal from an inverted yield curve because, in previous periods of inverted yield curves, bank lending slowed sharply, often contracting (see chart). Can the inverted yield curve signal be trusted if bank credit is accelerating, not slowing, or contracting as in previous periods? I would think not.

    Also, why are businesses and consumers still borrowing briskly after the Fed substantially raised official rates? Because the federal funds rate is not crushingly high, at least not yet. In the past, the federal funds rate proved restrictive when its level equaled or exceeded the growth in gross income and output (see chart). In other words, to slow domestic demand, the Fed had to raise rates equal to or above the increase in gross income and output.

    At the end of the third quarter of 2022, the growth in GDP exceeded the Fed funds rate by almost 600 basis points. That's huge, indicating the economy is far from one of the conditions in place before prior recessions. Even if the Fed median forecasts of higher official rates and markedly slower nominal growth are on the mark, the GDP-Fed funds' gap will not be closed before mid-year 2023. A recession beginning around mid-year runs counter to the bullish forecasts of a strong half for 2023.

    Many believe an inversion in the market yield curve, or the spread between the yield on three-month Treasury bills and the 10-year treasury, is a robust forecasting tool due to its consistent and reliable track record. Yet, yield curve inversion, by itself, is not a sufficient condition for an economic recession. Slowing or contracting credit growth and official rate levels equal to or exceeding income growth are also necessary conditions. Those conditions are not present, so until they are, the yield-curve recession signal will remain a forecast, not a reality.