Keith Romer

No, this is not one of the data points Justyna tracks for a living. She helps oversee something called the Leading Economic Index, or the LEI.

No recession pop in there, but it does include, in no particular order, new building permits for houses, orders by manufacturers for goods and materials, a piece of the University of Michigan's famous Consumer Sentiment Survey. The whole S&P 500 is included in there.

And like those other indicators, LEI is at a very high success rate at calling recessions. And the way this has shown up in the past, Justyna says, is the graph of LEI will hit a peak and then start going down.

So you're not just going to give me an easy answer is what you're saying?

So the LEI, like any index, kind of bobs up and down. It's like a heart rate monitor for the economy. And so it's not just any time the index goes down some. Justina is looking for something more like a plunge.

Duration and depth, those are simple enough. How far is the index dropping and for how long?

But when we talked to her, she was only working from that March data, which is to say data that did not include all of the economic chaos that went down in April with Trump announcing massive tariffs and the market tanking. And then Trump putting a pause on some of the tariffs and then markets like untanking. Yeah, April was a big month for confusing data.

So Justyna and all of us really were waiting to see the LEI numbers that incorporated all of that. That was going to be a big deal.

No.

No, we have to wait like everyone else. But we do not have to wait any longer. The new numbers just came out from LEI, and it says... Oh, that's the sound of me rubbing my hands together in anticipation. Well, the LEI did go down a decent amount, but not enough to signal a recession. OK, that's great.

So at the moment, these indicators, LEI, yield curve, SOM rule, they are saying we are not in and probably not headed for a recession. But maybe this is a situation that the indicators are not calibrated for. Because the hardest type of recession to predict is one that comes completely out of the blue, from a sudden shock, like what happened during the COVID pandemic.

Which means maybe social media could be the right place to go hunting for recession indicators after all. Not TikTok, not Instagram. the right place to look might be Truth Social and the account of one real Donald Trump. The president's posts about big new tariffs or big new trade deals.

The last few months have been this economic roller coaster. Tariffs were up, then tariffs were down, the stock markets were down, then they were back up. There were trade wars, then the trade wars were off, and then they're back on. People are just unsure what to make of all this.

Today's episode of Planet Money was produced by James Sneed. It was edited by Marianne McCune, fact-checked by Sarah McClure, and engineered by Sina Lafredo. Alex Goldmark is our executive producer. I'm Kenny Malone. And I'm Keith Romer. This is NPR. Thanks for listening.

Just swap them out. Swap them out. You know and I know. Skimp on something else. There are other places to pinch pennies. Just please. That's not the one. Underwear is very important. It's really important.

And if they want to work through that anxiety by hunting for recession indicators, we at Planet Money are here to help. Hello and welcome to Planet Money. I'm Keith Romer. And I'm Kenny Malone. Today on the show, the recession indicators. And not just the TikTok joke recession indicators, but the wonky indicators economists look at when they are trying to figure out, are we in a recession?

Will we be in a recession soon?

There is no perfect recession indicator. There's no data points that economists or TikTokers, for that matter, have found to perfectly 100% of the time predict when we are going into a recession or even when we are in a recession.

Right. This is the Business Cycle Dating Committee at the National Bureau of Economic Research. Rolls off the tongue.

Suddenly, something that we here at Planet Money are thinking about all the time is kind of having a viral moment. Recession indicators. Oh, yeah.

I think quite the opposite. What they do, right, they look at boatloads of data and then well after the fact determine, ah, yes, we were in fact in a recession starting however long ago. They are the official recession influencers, if you will.

And today we are going to take those two worlds and we are going to smash them together, the memes and the economics. The meme-conics, the meme-economics. Yep. Our mission is to go find out what recession indicators economists take seriously and see what those say.

There is a well-documented list of what you might call alternative recession indicators. For example, the men's underwear index.

Which brings us to why we called Claudia Psalm in the first place. Claudia has an entire recession indicator named after her. It's called the SOM rule.

Because when there's a recession, it can take a long time for lawmakers to actually get together and help people. So this group was thinking through sort of automatic triggers, like if the economic data does some particular thing, then this federal aid program would temporarily kick into gear.

The indicator works like this. When unemployment goes up by a certain amount, when a certain percentage of people become unemployed, then you can be almost certain that the U.S. is in a recession, even if the recession has not officially been declared yet.

Child is getting so bad out here. That is a recession indicator, says TikTok user TheSimplySimone.

So Claudia's working group, they publish their book and there is a chapter with her unemployment rule.

It did need a name, maybe.

She may not have wanted it, but all the same, the SOM rule was born.

And then reason number two, employers, they're generally trying to do everything they can before they get to laying people off. So if you are seeing SOM rule levels of unemployment in the economy, there's a really good chance it is because businesses don't have another choice and the economy is in a legitimately rough spot.

So some rule says not in a recession, but we should note the rule is only about whether we are in a recession today. It does not attempt to forecast recessions.

It has been an unusual last few months for economics watchers on social media.

Now, Menzies has been in the recession forecasting game for decades. He was a part of both the Clinton and the George W. Bush administrations.

Example number two comes from TikTok user Bryce Gruber.

He's still our hearts. Because the yield curve has mostly proven to be this very good recession predictor.

debt. Right. So maybe grandma buys you a treasury bond that's going to mature in 10 years. Right now, today, the U.S. government will pay you about 4.5% interest to lock up your money for those 10 years.

And this is generally the relationship between time and interest rates on U.S. government debt. Less time means less risk, which also means you get paid less interest.

Now, Menzies was not the first person ever to discover that the yield curve was a good indicator, but he has done a ton of research into how well it works as a predictor of recessions in the U.S. and in other countries around the world. And in the U.S., it has worked very well.

Presumably because those, I guess, are relatively cheap as bar snacks go is the indicator. Yeah. And example three.

So, OK, is the yield curve inverted right now? That's that's the big question. And the answer is it's partially inverted. That's the weird answer. Yeah. If you look at the graph, interest rates over the next three years dropped. Those are inverted. They go down when they would normally go up. After that, though, they start going up again.

And right now, Menzies' model says the probability of a recession in the next year is about 22%.

For a comparison, Menzies says during low risk times, there's about a 10 to 15% chance of a recession. So 22% is higher than that, but it's still not a number that makes him think a recession is coming.

But that is not the only way to try to get a holistic view of what is happening. Some economists try to figure out whether a recession is coming by going out and collecting a lot of different measurements from around the economy.

Well, we're going to let TikTok user Genius Girl Alert explain this one.

This is Planet Money from NPR.

One example, the commissioners of a lot of these agencies are only supposed to be fired for cause. But President Trump recently removed Democrat appointees from both the National Labor Relations Board and the FTC.

SEC cases that were already in court have just been abandoned, which Corey says never used to happen just because the White House changed hands.

But now, according to reporting by Reuters, before any new investigation can start, it first has to go all the way up to the top of the agency. It has to be approved by the politically appointed commissioners.

Now, this impulse to consolidate power in the executive branch, it did not start with Donald Trump. In fact, there's been this idea gaining traction in conservative circles for decades. It's called the unitary executive theory.

Fundamentally, the theory says, look, in a democracy, people choose who they want to run the executive branch. So that person should be in charge of all those civil servants and agencies that make up the executive branch.

Yes. Christina points out that it was Congress who established these independent agencies as independent in the first place. It's right there in the statutes that set them up.

Yeah, the requirements that your dashboard be padded and that your seatbelts attach the way they do. Those came from DOT regulations, not from Congress.

And it's worth saying, Christina thinks that the executive order expanding OIRA's power is probably just President Trump breaking a norm around the independence of the independent agencies, not a law. But a lot of the unitary executive actions, they are already being challenged on legal grounds.

So unitary executive, except for the Fed, for now at least.

But folks like former OIRA administrator Susan Dudley, they interpret it differently.

Susan does have one worry about how this all could go, that people will see this change that she's been pushing for for years and just see it as a power grab by President Trump.

And I'm Erica Barris. This is NPR. Thanks for listening.

To solve this coordination nightmare, the government added a little office within the Office of Management and Budget. An office to oversee all those government agencies. One office to rule them all. It's called OIRA. the Office of Information and Regulatory Affairs.

And for 45 years, OIRA has served this purpose. But President Donald Trump has decided that it's time for a big, big change. Hello and welcome to Planet Money.

We've got another one for you. Trump recently signed Executive Order 14215, ensuring accountability for all agencies. It goes into effect this week. This new order will massively expand the power of OIRA and the president.

Susan did two stints at OIRA. She started as a staff economist during the Reagan administration. Then a couple decades later, she was asked to come back to run the place for George W. Bush.

Okay. How do you spell? Government, agency, and yep, OIRA. One obscure but powerful government agency is OIRA.

As part of Reagan's attempt to rein in government regulation, he signed an executive order that said any new rules from federal agencies now have to be reviewed by OIRA before they go into effect.

Now, presidents from both parties have maintained and even expanded OIRA's powers over the years. And it makes sense. If you're the president, OIRA review gives you an opportunity to wrangle the many regulations coming out of the giant, messy federal government.

Another thing OIRA does is to get all of those agencies on the same page with each other, which Susan says sometimes put her in the middle of some tricky meetings.

But remember, the administrator of OIRA is not just Judge Judy with a black hat out there doing whatever she wants. She works for the president.

When she was running OIRA, the EPA wanted to put out a new rule about how much pollution was going to be allowed in the air.

These days, she teaches public policy at George Washington University, where she also founded the Regulatory Studies Center.

And Bush was not on board with this regulation because it set one air quality standard for people and another air quality standard for crops. Ultimately, he was like, no, EPA, you need to go with a different version of this rule. And the EPA did what it was told, though kind of under protest.

But as much as presidents from both parties have wanted to centralize control over the federal bureaucracy, there's always been one giant exception that they've respected.

A lot of these deal with financial type things. You've got the Federal Trade Commission.

That's right. The Federal Communications Commission.

The Securities and Exchange Commission.

And, of course, the Federal Reserve. The Fed. The Fed.

And they have the freedom to go against the president's agenda if they think they need to.

Corey says the independence creates a really important firewall between the White House and the markets that agencies like the SEC and FTC and FCC regulate. And these markets are massive, like trillions of dollars.

Also, unlike the Secretary of Commerce or the Treasury, who serve at the pleasure of the president, most commissioners from the independent agencies can only be fired for cause, like if they're incompetent or break the law or something.

Because, yes, Congress writes the laws that govern the country, but laws only go so far.

Corey says presidents can still influence policy at these agencies, but there's a limit to that influence.

At least until now, because of President Trump's Executive Order 14215, ensuring accountability for all agencies.

Which means OIRA and potentially also the president will get to weigh in on any big new regulation they want to implement.

Now, she gets why someone who worked at the SEC or any other independent agency might not want OIRA all up in their business.

In fact, back in 2018, she co-wrote an op-ed with an OIRA administrator from the Clinton years, calling for a similar reform to the one the Trump administration is putting in place.

This is Planet Money from NPR.

Basically, the function is to support civil society in holding governments accountable.

His assignment was to figure out what else besides asparagus his company should grow, something that would grow in sandy soil, stay fresh on a container ship, and hit American markets in the winter. And there was one fruit that Jose Antonio really loved, one from the northern hemisphere that was non-existent in Peru when he was growing up.

But now, Jose Antonio and his Peruvian colleagues wanted to see if they could come up with a blueberry that would grow in their country. Essentially, they were doing what USAID scientists had done with asparagus, but with blueberries.

Jose Antonio and his team had found a blueberry that would thrive on Peru's coast. But they still had to figure out how to create a pipeline, how to sell and market those berries in the U.S.

But he told them, mark my words, our country is going to be the largest blueberry producer and exporter in the world.

Yeah, the pitch did not work well. Some companies wanted an exclusive deal. Other companies insisted that they only grow certain varieties, not the Biloxi.

Before, he was calling blueberry brands. Now he was going straight to the supermarkets themselves.

Because some people do not think Biloxi blueberries taste all that good.

He told Jose Antonio that it wasn't just the taste. This blueberry actually had a few other things going for it, too.

Ever. It's true. Jose Antonio says he didn't realize he had that consistency advantage. And he discovered he had another advantage.

Yeah. Which we call brain berries. One of my favorites. I mix them with yogurt in the morning.

Suddenly, supermarkets had to figure out how to keep blueberries on the shelf all year long. The Costco contract turned into contracts with Walmart and Publix.

From what I can tell, Erica, about 4% of that is in your house alone.

So the impact of this aid for trade program on Peru has been pretty striking. Americans are obviously not responsible for all of the transformations that took place. But that giant upfront investment, plus a series of free trade agreements, those were definitely fruitful. Peruvians now grow and export not just asparagus and blueberries, but also a lot of mangoes and avocados and cocoa and coffee.

Like my entire grocery cart. Yes. Back in 1990, when all of this started, Peru exported about $60 million worth of fruit and vegetable products worldwide. Lately, that number is closer to $7 billion.

And I'm Keith Romer. Today on the show, the surprising story of an American initiative in South America. The goal? To curtail cocaine production. The strategy? To deploy drug enforcement agents, seed scientists, USAID, and free trade as weapons in the war on drugs.

And right up until the beginning of this year, when President Trump cut almost all of USAID's budget, the U.S. was still sending millions of dollars to Peru annually for aid programs like crop substitution. And there has been some success getting farmers up in the Peruvian mountains to switch from coca to crops like coffee and cocoa.

So now Peru is successfully exporting a whole lot of blueberries and still a whole lot of coca.

This episode of Planet Money was produced by Sylvie Douglas with help from Willow Rubin. It was edited by Marianne McCune and engineered by Jimmy Keeley. It was fact-checked by Sierra Juarez. Alex Goldmark is our executive producer.

Today, we're going on a journey to explain how we got all of those cheap Peruvian blueberries. That story begins in the United States. In the 70s and the 80s, cocaine, especially crack cocaine, became a real problem. It was ruining people's lives. It was ruining communities.

At the same time, there was this other effort to target the supply side.

So the cocaine was coming from Colombian drug cartels. But the coca plants, where cocaine comes from, they were growing all over the Andes, in Bolivia, Ecuador, and most of all, Peru. This was the very start of the supply chain.

So began what the U.S. called its Andean strategy. American law enforcement agents started outfitting the Peruvian military and local police with the weapons and equipment they needed to literally root out the problems.

Of course, they're going to tear it out. These are warriors. But trying to make change on the ground was really hard because the Americans were not exactly in control. There were cartels, militants, corrupt leaders, and all of them were making money off of the coca plant. So you could rip it out all you want. But farmers would find their way back to growing it because it was their livelihood.

Programs like these are informally called aid for trade. So instead of just sending a country aid, you send them aid that will help them trade.

So all of this was happening in the early 1990s when free trade was opening up in all kinds of ways. Congress voted to eliminate tariffs on almost everything grown in Colombia, Bolivia, Ecuador, and Peru, the four countries where most of the cocaine was coming from. The idea was to encourage more legitimate trade. And this is the program that Robert, as chief economist at the U.S.

International Trade Commission, was filing detailed reports about every year.

This combination of military, law enforcement, development aid, and scientific research was a massive effort.

And that brings us to the next part of our journey. What to grow and where exactly to grow it.

And changing crops could actually be dangerous. Early on, there were even attacks on USAID facilities and workers in Peru.

So in parallel, American aid workers and some farming pioneers were also trying to grow crops in an unexpected part of Peru, along the country's dry, sandy coast.

But regardless, Gustavo joined his friend, the two of them working to get a foothold on the sandy coast. And that's when they heard about these other coastal farmers who were working with Americans on seed projects south from where they were. Yes, the USAID.

Erica, how do you feel about asparagus?

I also love asparagus. Lots of Americans love asparagus. But back then, it was hard to get asparagus year-round. So there was a natural market for this Peruvian asparagus that grew on an opposite schedule. Affluent Peruvians started buying up land on the Costa farm. USAID offered them asparagus seeds. And those seeds started to sow a new era for Peru.

The combination of those changes in Peru with American investment, it worked. Words spread about this new industry where you could get a steady paycheck and not fear for your life.

Asparagus became this massive industry. And it wasn't just fresh asparagus, but also canned asparagus. American companies like Del Monte closed asparagus operations here in the U.S. and shifted them to Peru. All these asparagus canning factories opened up on the Peruvian coast. And after 10 years of fresh asparagus being available all year long, Americans were eating twice as much of it.

This is the moment this whole project to start a healthy new economy in Peru was really put to the test. Now these Peruvian farmers had to figure out how to adapt, but without American help.

Jose Antonio had been absent for this entire transformation. In the 1990s, he left Peru because the country was in turmoil. So he went abroad to work in fruit. Banana farms in Costa Rica, the fresh cut fruit industry in Belgium, the Los Angeles produce terminal. He learned just about every aspect of the business.