The Dow Jones Industrial Average closed down 800.49 points today, or 3.05%; the Standard & Poor’s 500 finished 2.93% lower; and the NASDAQ Composite lost 3.02%. One reason for the plunge was an intraday inversion in the Treasury yield curve with the yield on the 10-year Treasury dropping below the yield on the 2-year Treasury.(For the day the yield on both maturities finished at 1.58%) Wall Street sees an inversion in the yield curve as an indicator of a coming recession. (The yield curve has inverted before every U.S. recession since 1955. Which isn’t to say that a recession always follow on an inversion in the yield curve. When a recession has followed an inversion of the yield curve, the lag has been anywhere from six to 18 months. So, by this indicator anywhere from early 2020 to 2021.)
But frankly I’m more worried about the drop in the number of job openings in the U.S. economy than about an inverted yield curve. The United States economy had 7.3 million job openings in June, down from a peak of 7.6 million in November, according to the latest Labor Department data. The absolute decline is very modest but the trend is worrying because other economic data–weak business spending on capital goods–indicates that companies have cut back on investing in their own businesses as a result of the uncertainties created by the U.S.-China trade war and other administration tariff policies. If companies are also cutting back on hiring plans, we’re looking at the kind of shift in sentiment that can create a recession.