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Opinion
Conor Sen

Oil Prices Are Breaking an Old Recession Tradition

Soaring energy costs have signaled major downturns in the past, but recent market declines are proving to be a tailwind for the economy.

Falling prices at the pump aren’t the way recessions usually begin.

Falling prices at the pump aren’t the way recessions usually begin.

Photographer: Joseph Prezioso/AFP

You don't have to look far these days for evidence of a looming recession: The housing market is slumping, the bond market's yield curve has inverted , and the Federal Reserve is projecting that the unemployment rate will rise in 2023. But another noteworthy factor that was part of that gloomy picture just a few months ago has disappeared: the price of oil.

In the three most recent recessions before the pandemic, oil soared in the run-up to the downturn. We saw prices rise earlier in the year, only to cool off over the past six months. This is one of the more promising developments for people who are hoping the overheated US economy will be able to achieve a soft landing. It also raises questions about whether oil is as salient an economic indicator as it has been in the past.