Long time readers of this blog know that we do not spend much time around here dissecting economic statistics. This is due in large part to the oftentimes ambiguous nature of headline economic reports. On the other hand, Barry Ritholtz at the Big Picture is far more adept at this sort of analysis. His most recent post involves the role of owner-occupied housing on headline inflation statistics.

One economic statistic that we do appreciate in part because it is unambiguous is the slope of the yield curve. It is indeed measured with precision on a real-time basis. Ticker Sense is on the case and notes that the yield curve is once again inverted and is being ignored by the major media. Although an inverted yield curve has historically been indicative of slower future economic growth there exists a number of analysts who do not believe in the power of this relationship.

James Hamilton at Econbrowser has a primer on the expectations hypothesis and its relationship to the yield curve. Hamilton is able to extract a scenario for short term interest rates from the current curve. In addition, Hamilton uses a relatively simple economic model* that uses the yield curve to generate a (surprisingly high) probability of a recession in the coming four quarters.

*The folks at macroblog also fans of the previously noted post.

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