The Next Recession Is Going to Be Brutal

The economy is showing signs of turning, and the people who saw the least benefit from the latest boom are now the most vulnerable ahead of the next bust.

By Tessa Stuart and cross-posted from Rolling Stone

Market-watchers enjoying their first sip of coffee around 6 a.m. might have done a spit-take. For a brief period Wednesday morning, yields on two-year Treasury bonds were higher than those on ten-year ones — a short-term investment was seen as riskier than a long term one, and the return therefore higher — a signal that can portend major trouble for the economy. The last time the yields “inverted” was in 2007, before the “great” recession; the two times before that also directly preceded recessions. The dynamic flipped back before markets opened Wednesday, but stocks nevertheless dropped amid new fears of serious economic trouble ahead.

According to research from Credit Suisse (via the Washington Post) recessions historically have followed 18 to 24 months after the yield curve inversions like the one Wednesday morning.

Before we get too carried away, it’s worth mentioning that there are some who argue the yield curve invert isn’t as reliable a recession indicator as it’s generally made out to be. Former Federal Reserve chair Janet Yellen struck a note of caution during a Wednesday morning appearance on Fox Business. “Historically, it has been a pretty good signal of recession, and it think that’s when markets pay attention to it, but I would really urge that on this occasion it may be a less good signal,” Yellen said. “The reason for that is there are a number of factors other than market expectations about the future path of interest rates that are pushing down long-term yields.”

But sooner or later, the current economic expansion — by many measures the longest in U.S. history — is going to end. And that’s particularly troubling when you consider how many Americans continue to fare poorly even in the current “strong economy.”

Some 40 percent of American families struggled to cover the cost of food, health care, housing or utilities last year, according to a report from the Urban Institute. A Fed found four in 10 adults couldn’t cover a $400 emergency expense. Even at the current low unemployment rate, about 6 million workers are actively looking for jobs right now — and that doesn’t include part-time workers looking for more hours or those who want work but have stopped looking. Men in the prime of their lives are employed at lower rates than they were before the last recession. Suicide rates are spiking, driving down U.S. life expectancy

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