Did the Yield Curve Predict a 2022H1 Recession?


Figure 1: Forecasted probability of recession from 10yr-3mo term spread (blue), from 10yr-2yr term spread (tan), 10yr-3mo term spread augmented by FCI, foreign term spread (green). All models estimated over 1986M01-2022M11. NBER defined peak-to-trough recession dates shaded gray. Lilac shading denotes a hypothesized 2022H1 recession. Red dashed line at 50% probability. Source: author’s calculations, NBER.

Description of the probit models are contained in this post. Note the low estimated probabilities for recession ascribed to the period of 2022H1, which runs counter to the assertion of reader Steven Kopits. A recession sometime in 2023H2 is, on the other hand, not implausible.



62 thoughts on “Did the Yield Curve Predict a 2022H1 Recession?

  1. pgl

    “U Mich said we were in recession in H1. GDP said we were in recession in H1. So did VMT and gasoline consumption.”

    Well if someone at the University of Michigan said we were in a recession – don’t let any pesky facts get in the way.

  2. ltr


    November 25, 2022

    This Holiday Season, the Poor Buckle Under Inflation as the Rich Spend
    Even if policymakers achieve a gentle economic slowdown, it won’t be smooth for everyone.
    By Jeanna Smialek
    Photographs by Tony Luong

    November has been busier than expected at the Langham Hotel in Boston as luxury travelers book rooms in plush suites and hold meetings in gilded conference rooms. The $135-per-adult Thanksgiving brunch at its in-house restaurant sold out weeks ago.

    Across town, in Dorchester, demand has been booming for a different kind of food service. Catholic Charities is seeing so many families at its free pantry that Beth Chambers, vice president of basic needs at Catholic Charities Boston, has had to close early some days and tell patrons to come back first thing in the morning. On the frigid Saturday morning before Thanksgiving, patrons waiting for free turkeys began to line the street at 4:30 a.m. — more than four hours before the pantry opened.

    The contrast illustrates a divide that is rippling through America’s topsy-turvy economy nearly three years into the pandemic. Many well-off consumers are still flush with savings and faring well financially, bolstering luxury brands and keeping some high-end retailers and travel companies optimistic about the holiday season. At the same time, America’s poor are running low on cash buffers, struggling to keep up with rising prices and facing climbing borrowing costs if they use credit cards or loans to make ends meet.

    The situation underlines a grim reality of the pandemic era. The Federal Reserve is raising interest rates to make borrowing more expensive and temper demand, hoping to cool the economy and bring the fastest inflation in decades back under control. Central bankers are trying to manage that without a recession that leaves families out of work. But the adjustment period is already a painful one for many Americans — evidence that even if the central bank can pull off a so-called “soft landing,” it won’t feel benign to everyone.

    “A lot of these households are moving toward the greater fragility that was the norm before the pandemic,” said Matthew Luzzetti, chief U.S. economist at Deutsche Bank.

    Many working-class households fared well in 2020 and 2021. Though they lost jobs rapidly at the outset of the pandemic, hiring rebounded swiftly, wage growth has been strong, and repeated government relief checks helped families amass savings.

    But after 18 months of rapid price inflation — some of which was driven by stimulus-fueled demand — the poor are depleting those cushions. American families were still sitting on about $1.7 trillion in excess savings — extra savings accumulated during the pandemic — by the middle of this year, based on Fed estimates, but about $1.35 trillion of it was held by the top half of earners and just $350 billion in the bottom half.

    At the same time, prices climbed 7.7 percent in the year through October, far faster than the roughly 2 percent pace that was normal before the pandemic. As savings have run down and necessities like car repair, food and housing become sharply more expensive, many people in lower-income neighborhoods have begun turning to credit cards to sustain their spending. Balances for that group are now above 2019 levels, New York Fed research shows. Some are struggling to keep up at all….

  3. pgl

    How low can the Republican Party go?


    Conspiracy theory peddler and MyPillow CEO Mike Lindell is considering a run for Republican National Committee chair and mulled a bid to face current chair Ronna McDaniel as she seeks reelection in January.

    Oh well – at least Republicans will get cheap pillows.

      1. pgl

        “President Donald Trump reportedly cut short his meeting with MyPillow CEO Mike Lindell within minutes, after the entrepreneur was spotted at the White House brandishing notes referencing martial law, the Insurrection Act and a CIA leadership shakeup.”

        For years whenever Mike, Mike, Mike would appear on my TV trying to sell me his stupid pillows, I would lose interest and just change channels. The man has been an annoying twit for many years.

  4. pgl

    Aaron Thompson may pretend to be a preacher but how can anyone so filled with hate be considered a Christian?


    On Tuesday night, Christian hate-preacher Aaron Thompson of Washington’s Sure Foundation Baptist Church celebrated the mass shooting at Club Q, saying that it was a “good thing” five people at the LGBTQ club were murdered because it means “they’re not here anymore to molest kids.” There is no evidence suggesting the victims did anything of the sort, and Thompson seemed to realize that moments later when he qualified his statement by saying they were molesting kids with “their eyeballs” because the shooting took place during a drag show.

    1. Moses Herzog

      I would think, unless Thompson makes a public apology (and maybe even then) the families are very much justified to file a Sandy Hook vs Alex Jones style defamation lawsuit against Thompson and his “church”. They are NOT Christians, they are Christianists. Anyone confused by the latter term is encouraged to read Andrew Sullivan’s “The Dish” blog when it was under “The Atlantic” magazines banner.

      Freedom of speech does not allow people to run around accusing others of horrendous crimes they never committed. It’s waaaaay past time some people learned that.

  5. Macroduck

    Credit Suisse is being absorbed by more successful institutions – SNB, Pimco, etc. The usual remedies are being applied, including equity dilution, asset sales, sales of business units. Shareholders suffer, as they should.

    That’s one big systemic risk reduced. Give thanks.

    1. Macroduck

      Apparently, reputational damage to CS has made dismemberment unavoidable. UBS has been gobbling up CS wealth manage clients in Asia. Wealth management = deposits, so CS was force to shrink asset holdings, mostly at a loss due to market conditions. Death spiral.

    1. Moses Herzog

      Kind of wild to see Michelle Malkin standing right by Fuentes in the photos. She is really an unusual person. Then my next question is, does Fuentes (this is a question prompted by Fuentes’ general racism) not see Filipinos as a “threat” to “white culture”??

        1. Moses Herzog

          She strikes me as a little more educated than Herschel and knowing how her words are effecting people, but yeah, “for all intents and purposes” the same deal, yup. I’m trying not to let her attractiveness effect my perceptions, but yeah, I think you pretty much nailed it.

          Whatever her looks, she’s pretty much a nutjob.

    2. pgl

      Kevin Drum had a post covering how certain Republicans are SHOCKED I tell you SHOCKED that Trump had dinner with Fuentes. Seriously – did these guys get it when he first ran for President in 2016? He has always been brazenly racist.

  6. Macroduck

    Anybody watching South Korea’s credit market headlines? The government has rolled out a number of market rescue measures and delayed scheduled prudential regulations in the past couple of months. The ten-year spread vs the U.S has gone from gone against S. Korea by roughly 70-75 basis points over the past year:


    Of course, rising rates, dollar strength and China’s economic troubles have put stress on credit markets throughout Asia, but S. Korea seems to be the worst hit among developed economies. That’s partly because S.Korea has a pretty scary debt profile:


    Private debt amounts to 275% of GDP, with household debt over 100% of GDP:


    Personal loans account for about 40% of household debt, so 40%+ of GDP.

    For comparison, private debt amounts to roughly 92% of GDP in the U.S.

  7. Macroduck

    Apple is progressively turning away from China as a manufacturing base, due to the unreliability of Foxcomm supply. One result is that Foxcomm suppliers are suffering from having only one customer, and are looking elsewhere:


    There is a new equilibrium out there somewhere, but it seems unlikely to have been reached just yet.

    The symmetry between Apple’s loss of confidence in China and Chinese suppliers desire to diversify is natural. If this reaches beyond Apple (and why wouldn’t it?), there would seem to be implications for China’s growth and value-added prospects.

    1. pgl


      One of the interesting notes in this discussion is how Foxconn had turned to Chinese producer of the components for its iPhone contract manufacturing. But yea – Apple decided a while back to rely on other contract manufacturers some of them being outside of China. Oh well – China has decided to go big in semiconductors.

    1. Moses Herzog

      You know I liked him when he was at Dallas and Philadelphia. One of the greatest athletes I have ever seen in my life. And you really want to give him “a pass” on the Ebonics and maybe learning the wrong way growing up, and then unlearning bad English is twice as hard as just starting with a blank slate. That’s why you’ll never hear a mainland China English speaker say “ain’t”. At least with that one word they haven’t been taught the wrong way—so there’s nothing to unlearn. My deal with Herschel is, there’s ignorance, and then there’s people who revel in their ignorance and bathe in their own ignorance. Herschel is in the latter group.

  8. Erik Poole

    Timely chart.

    For the early 2020 pandemic-driven recession, it looks like the 10yr-3mo. term spread predictor and the Ahmed and Chinn augmented predictor were lagging indicators.

    1. Menzie Chinn Post author

      Erik Poole: To be completely correct, the preferred measure of Ahmed-Chinn (in the paper) is recession *within* 4 quarters, so wouldn’t be so bad a predictor. In the post, I stick to the *at 12 months* prediction, in which case one might interpet the indicator as –not lagging (which would mean literally inversion *after* recession)– but as insufficiently leading (inversion maximimum at 19M08, recession at 20M02, so only 4 month lead).

      1. Barkley Rosser

        There you go again, putting up four comments in a row that end with that 3.6 per millionn number. It used to be 4.0 per million as you relentelssly informed us, but then it suddenly dropped to 3.6. I asked for an explanation of how that could happenb, but you never provided one, just noted the official underlying numbers for 3.6. Well, whatever it is or was or why, looks like it wil go up. Maybe that is why you want to repeat the number so many times now, while it is still that, supposedly.

        1. Barkley Rosser

          And, of course, somehow the P’RC has not bothered to gather or provide data on the increase in deaths by other causes that has come about due to the policies that have led to this low number that you like to trumpet here repeatedly, ltr. I have brought this matter up several times, noting that there have been media reports of increases in such deaths and unhappiness associated with them, although never any numbers.

          I asked you if there any such numbers, but you have never provided any, although I think that on at least one occasion you agreed that this might be a problem. I think on another occasion when I brought this up you more or less threw it back at me to provide some numbers, but I had to admit that none were available to the best of my knowledge. But that the numbers are not available does not mean that this is not a problem that has people upset, and, ooops, it does seem that they are indeed upset, despite the glories of the recent Party Congress.

          1. Barkley Rosser


            Because basically we have not had any, or certainly not anywhere anything like what is going on in China. Even at the worst of our pandemic lockdowns, people could go to hospitals for treatment of other illnesses, although at a certain point there capacity issues, with this not being caused by the lockdowns but by the scale of the pandemic and the numbers of people in the hospitals because of it.

            Maybe you do not get how intense these lockdowns in China are. People en masse are being confined to their residences, no matter what, including other illnesses. Nothing like that was ever done here. Upshot has been lots and lots of people dying of other illnesses, with scattered reports in the media about this from many cities, but no numbers.

            You are again exhibiting being kind of out it. Did you really think US lockdowns resembled what is happening in China? Did you?

  9. ltr


    November 26, 2022

    China ships its first F-class heavy-duty gas turbine
    By Gong Zhe

    China has shipped its first F-class heavy-duty gas turbine from Deyang City, Sichuan Province on Friday, according to a report from China Media Group (CMG).

    The turbine, with a capacity of 50 megawatts, signifies China’s breakthrough in the area, CMG said.

    It took over 13 years for the country to design and build such a turbine, which will enter real-world operations after shipment.

    Heavy-duty gas turbines are core equipment for power plants. Many engineers in China describe it as the “crown jewel” in the manufacturing industry.

    The turbine has tens of thousands of parts, which involved hundreds of companies and research institutions to design and manufacture. China has formed a supply chain of designing and building such turbines without the use of imported technologies.

    1. ltr


      November 23, 2022

      China produces world’s largest 16-megawatt wind turbine
      By Ma Jingjing

      China’s home-developed 16-megawatt offshore wind turbine rolled off the production line in East China’s Fujian Province on Wednesday. The turbine boasts the world’s largest single-unit capacity and biggest impeller, marking a breakthrough in high-end research and manufacturing to reach world-class levels….


      November 20, 2022

      Chinese PV giant breaks world record for silicon solar cell efficiency

      China has achieved a new world efficiency record at 26.81 percent for silicon solar cells, according to the certification report of Institut für Solarenergieforschung in Hamelin, Germany, Chinese solar giant LONGi Green Energy Technology Co said on Saturday.

      1. pgl

        I guess this eclipses this news from 2 years ago:


        Paris, November 12th, 2020 – GE Renewable Energy announced today that its Haliade-X 12 MW prototype, the world’s most powerful wind turbine in operation today, has received a full type certificate from DNV GL, the world’s largest independent certification body. This full type certification, which follows a provisional type certification announced in June, provides independent verification that the new turbines will operate safely, reliably and according to design specifications. It is a key step in enabling customers to obtain financing when purchasing the turbines.

  10. Moses Herzog

    We must have some semi-affluent folks on the blog. Just kinda a random curiosity for me here. Anyone travel by airline this Holiday weekend and either things went amazingly smooth, or reverse, they made you wait around or be rescheduled?? I had a super bad experience with American Airlines getting stranded once, but that was years ago.

    1. Anonymous

      daughter had flight scheduled for this 8:00 this am airline changed to 6 am a few days ago…

      she made it to dominican republic okay!

      myself i do not put up with tsa; nowhere worth that and the airlines’ hassle.

      1. Moses Herzog

        I’m glad she made it to where he was going safely. Thanks for the reply (data point) and may God bless your daughter.

  11. pgl

    Only on Faux News:


    Matt Whitaker: ‘I don’t have any reason to believe there’s enough evidence to indict President Trump’

    In case you don’t remember who this former football player is – he was Trump’s toadie Attorney General for 3 months in between Sessions and Barr. A nine minute plus interview where this former football player bloviates even more from Trump. Whittaker does not think Trump did anything wrong on 1/6/2021? After all storming the Capitol inciting an insurrection, killing Capitol police, and trying to murder the Vice President and the Speaker is protected free speech under the First Amendment? And of course Trump did not know what all those classified documents he took were.

    Did I say he played football? Probably without a helmut.

  12. pgl

    How does one graduate from the University of Georgia without knowing what a pronoun is?


    OK this is Hershel Walker spreading hate towards transgenders. Now Hershel says he served in the military but he did not. So what is up with this claim that the use of pronouns reduces military readiness?

    YEA – Hershel is one incredibly stupid person but that is why Cruz and little Lindsey love him.

    1. Moses Herzog

      @ pgl
      I’m trying to say this half-articulate while drinking. Uhm. I think everyone knows how football players (read as, great Black athletes) who are literally illiterate (say “literally illiterate” 8 times super-fast) get to their junior year of college. Because money for NCAA universities from FB ticket sales and NCAA sports merchandise. But really, I feel the sadder part of the “Herschel equation” is, when Blacks have long been “on the outside” of society or “looked down on” “excluded from a good education” etc, you name it, How a Black man can say gays and trans shouldn’t be allowed a “fair shake” or the same starting-line/finish point as all Americans. Wouldn’t Black men, of all people “get” this point/concept/moral???

  13. pgl

    The Irainian government has decided anyone who dare protests their abuse of women must be killed:


    Nov. 26 (UPI) — Iran’s Supreme Leader on Saturday praised the paramilitary group responsible for killing hundreds of anti-government protestors in recent months. In a meeting with the paramilitary group Basij in Tehran, Ayatollah Ali Khamenei described members of the popular protest movement as “rioters” and thugs” backed by foreign forces such as the United States. “You defended the Haram [holy shrines in Syria] from the U.S.-manufactured Daesh,” Khamenei said, referring to thousands of Islamic Revolutionary Guard Corps and Basijis who have assisted the regime of President Bashar al-Assad in Syria. Daesh is the Arabic acronym for Islamic State. Witnesses say the Basij forces have used live ammunition and heavy machine guns against protestors, killing hundreds and injuring thousands more. Many of the protestors have been detained and died under torture, regime opponents allege. Some of harshest crackdowns have occurred in Iran’s northwest, home to country’s Kurdish minority. The Kurdish human rights group Hengaw claimed at least 42 people have been killed over the past week while protesting as a result of “direct fire from the Iranian government forces,” NBC News reported.

    This horrific abuse by the government has put the World Cup team from Iran in an impossible position torn from supporting their fellow citizens v. supporting their government. And they have to play Team USA on Tuesday.

  14. pgl

    I just watched Costa Rica redeem itself by beating Japan. It seems Donald Fat Boy Trump did not watch:


    FIFA appealed on Monday for “tolerance, mutual respect and common sense” after U.S. President Donald Trump denounced the annulment of a policy that required football players to stand during the national anthem. “I won’t be watching much anymore!” Trump tweeted on Saturday. Trump retweeted a tweet by Florida Republican Rep. Matt Gaetz, who wrote: “I’d rather the US not have a soccer team than have a soccer team that won’t stand for the National Anthem.”

    Like Fat Boy has a clue what soccer even is. Same with playboy Matt Gaetz who likely was busy with some teenage prostitute anyway.

    1. Barkley Rosser


      But but but! OBVIOUSLY the reason that number of deaths is that low 3.6 prt million we have hears about so many times, after previously seeing it to be 4.0 per million, with no explanation for the odd decline of it at some point, is because of all those lockdowns!!!!!!! Don’t you get it? Xi Jinping knows all, New Great Helmsman that he is.

  15. pgl


    ‘Iran’s state-affiliated media has called for FIFA to kick USA OUT of the World Cup after they posted an altered image of the Iranian flag as a show of support for women’s rights in Iran.’

    Seriously dudes – do you have no faith in your national football team? Let the athletes settle who gets to move on in the match on Tuesday. I was going to cheer for Team USA anyway but if Iran’s team is eliminated – all the better.

  16. pgl

    The parents of Russian soldiers sent to Ukraine to die needlessly are turning against Putin:


    A tragic father who lost his conscript son in Vladimir Putin’s war in Ukraine has accused the Kremlin dictator of being a traitor to Russia for the for killing or maiming of up to 100,000 servicemen. Dmitry Shkrebets, 44, accused the Russian president and his commanders of ‘murdering’ his son by their incompetence and rule-breaking, and went on to challenge Russia’s FSB secret service to arrest him for claiming Putin ‘betrayed’ him.

    1. Barkley Rosser


      Now now now now. V.V. Putin has so generously met with a carefully selected set of mothers of fighters on the front, still living, on Russian Mothers Day, to explain how glorious their efforts are and how since everybody has to die one might as well do so achieving something by doing so on the ftont. Obviously this father is just a whiner who should go to jail, since he does not appreciate the importance of this special operation against Nazi Satanism.

      1. Anonymous


        that ‘Nazi Satanism’ call themselves ‘integral nationalists’….

        irony is misused when it comes too close to real.

        1. Barkley Rosser


          Oh gag. Which Russian propaganda outlet are reading now? Between the world wars indeed pro-Nazi Ukrainians called themselves “integral nationalists,” but that sort of thing pretty much disappeared later, aside from some scattered politicians, with them having no power in the current government.

          The farce is that Putin has come to realize that his “denazification” propaganda has increasingly become less and less credible with anybody, certainly with anybody in Ukraine he would like to convert to support the Russian invasion, with gobs of evidence being that people there who used to support Russia now totally disgusted after all the war crimes being committed during the invasion. He still uses this anti-Nazi rhetoric in Russia, and one of his flunkie even used it to threaten Kazakhstan recently, noting that, “Maybe we shall identify Nazis in Kazakhstan” after its leaders criticized Putin’s Ukraine invasion.

          So, not getting anywhere with this ridiculous anti-Nazi rhetoric he has now added this anti-Satanism piece to it, with this probably aimed at right wing Christian natinaliist types in the US who are anti-gay, which is his big schtick, him as savior of civilization against gays and trans people, going on at length in recent speeches about this. So, he just combines his the supposed enemies as being “Nazi Satanists” in Ukraine, although it is my impression that the scattered neo-Nazis in Ukraine are as anti-gay as Putin is. So the whole thing is utterly farcical.

          But you seem to be too stupid and ignorant to firgure any of this out, apparently, so bring up this farcical matter of “integral nationalism.” Super gag.

  17. pgl

    Hershel Walker strikes me as someone who wants to turn the clock back to when blacks were slaves and women were nothing more than baby factories. How else does one interpret his answer to a question that suggested young people’s aspirations to a better America should be respected?


    Well, first of all, they don’t know that the grass is not greener on the other side, that they think there’s somewhere better, and if they know another place that’s better than the United States of America, my thing is, why don’t you go there? Or tell me and let me know who that is because I can tell them right now there’s not. I think our biggest problem is we have not shown our kids that most of the people today haven’t earned the right to change America. And what I mean by that. There’s people that have died, that have given their life up, there are people that have given their life up for this flag, they’ve given this life up, that, for this National Anthem, they’ve given their life up for our freedom and these liberties that we have in this country today. And we’re taking it for granted. Well, I don’t want that to happen. And I’m saying, and I’m not being tough, I’m saying if you know a place better, you go there, but you’ll lose your citizenship here in the United States of America.

    In other words, real Americans should act like Hershel and just let old rich white people tell them how to think and behave. I’m sorry but Hershel is a pathetic excuse for a potential Senator.

      1. pgl

        I was wondering who this Christine Dolan person was since she seemed happy with what Hershel said. Far right crazy lady she is. Of course the PatriotTakes twitter account should have been my 1st clue.

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