The problem is that when the yield curve INITIALLY inverts, or comes close to inverting, there won’t be a “recession” immediately noticeable in the data. This is because, as discussed previously, while the calls of a “recession” may seem far-fetched based on today’s economic data points, no one was calling for a recession in early 2000 or 2007 either. By the time the data is adjusted, and the eventual recession is revealed, it won’t matter as the damage will have already been done. As you notice in the chart above, the yield curve predicted each recession, but the yield curve was already rising sharply by the time the recession was officially announced.
