Authored by Mike Shedlock via MishTalk.com, a modified McKelvey recession indicator with no false positives or false negatives since 1953 suggests we are currently in a recession. Historically, 100 percent of the time, under similar conditions, the economy has been in recession. This indicator evaluates the 3-month average unemployment rate, subtracts the 12-month low, and if the difference is 0.30 percentage points or more, a recession is indicated.

Edward McKelvey, a senior economist at Goldman Sachs, created this indicator but it had many false positives. Claudia Samn, a former Fed economist, revised McKelvey's indicator to a threshold of 0.50 but it still had false positives. Pascal Michaillat and Emmanuel Saez from the University of California, Santa Cruz further refined this work by combining job vacancy rates with unemployment data to create the PMES indicator. The PMES compares the McKelvey indicator's value with a similar one based on job vacancies, defined as the ratio of job openings to the labor force. Data from the BLS Job Openings and Labor Turnover (JOLTS) report are used, dating back to December 2000.

Regis Barnichon's work in 2010 validated this second indicator by modeling vacancy behavior over time, closely tracking JOLTS data. The PMES indicator considers the minimum value between the McKelvey and vacancy-based indicators. Pascal Michaillat emphasized that their indicators never yield negative values, unlike the Sahm indicator. In comparing the two, the PMES indicator tends to signal recessions faster except during the 2008 Great Recession. As of August 2024 data, the PMES indicator was at 0.54 percentage points, suggesting a 48 percent probability that the US economy is in recession, possibly starting as early as April 2024.

Such signals are reinforced by recent negative job revisions, slowing economic activity in most Fed districts, and a poor jobs report for private payrolls. These factors build a compelling case that the US economy is likely already in recession.