Recession Dashboard: What 7 Key Indicators Say Now

The 10-year/2-year Treasury spread turned positive in late 2024 and has stayed there. As of March 12, it sits at +0.51 percentage points — the 10-year at 4.21% and the 2-year at 3.64%.

That matters because yield curve inversions have preceded every US recession since 1970 — a pattern explored in our treasury yield curve analysis. But here is the nuance most commentary misses: the recession signal fires not when the curve inverts, but when it un-inverts. The logic is straightforward — the curve steepens because the market expects rate cuts, and rate cuts come because the economy is weakening.

The un-inversion happened months ago. The spread has stabilised around 0.50-0.60 basis points through February and March. The traditional 12-18 month recession window after un-inversion would place the danger zone from roughly mid-2025 through mid-2026.

We are in that window right now.

Verdict: Green, but with a caveat. The curve is positive, which is good. But we are inside the historical window where post-inversion recessions strike.

This is the indicator that worried markets most in late 2025. The retreat from 0.43 to 0.27 is the single most bullish data point in the entire dashboard.

Verdict: Green. Declining and well below the trigger threshold.

Unemployment at 4.4% is not recessionary by any historical standard. But context matters.

The rate has drifted higher from 4.1% last June. That 30 basis point rise over eight months is enough to keep it on the watchlist without triggering alarm bells. The labour market is softening, not cracking.

Initial jobless claims tell the other half of the story — and it is more reassuring. Weekly claims printed 213,000 for the week ending March 7, firmly in the 200,000-230,000 range that has held since late 2025. No acceleration. No signs of layoff waves.

The disconnect between a slowly rising unemployment rate and flat jobless claims suggests the labour market is cooling through slower hiring rather than accelerated firing. That distinction matters: hiring slowdowns are gradual and manageable. Layoff spirals are not.

Verdict: Yellow. Unemployment trending up but claims stable. Watch for claims above 250,000 as the next warning level.

The University of Michigan Consumer Sentiment Index sits at 56.4 as of January 2026. That is a recovery from the 51.0 trough in November 2025, but it remains deeply depressed by historical standards.

For perspective: sentiment averaged 98.0 in 2019 before the pandemic. The current reading is 43% below that pre-COVID baseline. Every recession since 1980 was preceded by sentiment dropping below 70. We have been below 70 since mid-2022.

The Iran conflict headlines and rising retail price concerns are likely to keep sentiment suppressed even as hard economic data improves.

Here is the uncomfortable question: does sentiment still predict recessions when it has been structurally depressed for four years? The honest answer is that we do not know. Consumer spending has remained resilient despite low sentiment readings, which either means sentiment has become a less reliable indicator or that spending is being propped up by savings drawdowns and credit expansion — neither of which is sustainable.

Verdict: Red. Persistently weak. Either it is a broken indicator or a slow-burning warning. Neither interpretation is comforting.

Real GDP hit $31.4 trillion in Q4 2025 (annualised), continuing a steady growth trajectory. Nominal growth has been running at roughly 6.5% annualised — solid by any measure.

Industrial production, often the first hard data series to roll over before recessions, registered 102.34 in January 2026. That is modestly higher than the 101.26 reading in October 2025, suggesting manufacturing is expanding — slowly, but expanding.

Neither metric is flashing any concern whatsoever.

Verdict: Green. Growth continues at a healthy pace.

Building permits dropped to 1,376,000 in January 2026, down from 1,455,000 in December. That 5.4% month-over-month decline is notable because housing is the economy's most interest-rate-sensitive sector — as recent home sales data confirms.

Despite the Fed cutting rates by nearly 70 basis points over the past year, permits have not meaningfully recovered. The January print is the lowest since August 2025 (1,330,000). Higher long-term rates — the 10-year yield has climbed to 4.21% even as the Fed cuts — are keeping mortgage rates elevated and constraining new construction.

This is the classic late-cycle dynamic: the Fed eases short-term rates but long-term rates refuse to follow because bond markets are pricing in persistent inflation or fiscal risk. Housing cannot recover until long-term rates come down, and there is no sign of that happening.

Verdict: Yellow. Permits declining despite rate cuts. The transmission mechanism from Fed policy to housing is broken.

Five green signals, two yellow, one red. The balance of evidence does not support a recession call. But the yellow lights — a slowly rising unemployment rate and declining building permits — are exactly the kind of early-cycle deterioration that precedes downturns by 6-12 months.

The pragmatic read: this is not the time to go risk-off, but it is the time to stress-test your portfolio. If you hold rate-sensitive assets like homebuilders or commercial REITs, the housing data should give you pause. If you are overweight consumer discretionary, the persistent sentiment weakness is a real headwind.

The biggest risk is not recession — it is stagflation. CPI is running at roughly 2.4% year-over-year while unemployment drifts higher and the Fed has already deployed 70 basis points of cuts. If inflation reaccelerates from here, the Fed loses its ability to support the labour market without reigniting price pressures. That is the scenario these indicators cannot capture, and it is the one investors should be positioning for.