The bond market yield curve normalized on Wednesday morning for the second time in two years, marking the reversal of a classic recession indicator — but the economy isn’t out of the woods just yet. 

The curve — which tracks the relationship between the two-year and ten-year treasury notes and has been mostly inverted since 2022 — turned positive after a weaker-than-expected job openings report strengthened expectations that the Federal Reserve was headed to cut interest rates. 

According to data released by the Bureau of Labor Statistics, the number of job openings fell in July for a second consecutive month to 7.67 million — the lowest number since January 2021. The report is just one of several crucial economic indicators coming out this week that are expected to have an impact on the Fed’s rate cut decision later this month. 

Expectations for an impending interest rate cut were also bolstered on Wednesday after president of the Atlanta Federal Reserve, Raphael Bostic, warned the central bank against keeping rates high for too long, and signaled that he was ready to start lowering rates. 

A positive curve — in which longer-term yields are higher than short-term yields — aligns with the bond market assumption that investors require higher yields to be incentivized to hold longer term bonds, and thus is viewed as a “normal” relationship. 

An inverted curve, on the other hand, has long been considered an indication of an impending recession, given that shorter duration yields drift higher when investors expect slower growth in the future. The curve has been mostly inverted since the Fed began to raise interest rates in March 2022 — only briefly normalizing in August in response to weaker-than-expected employment data. 

While a normal yield curve is generally viewed as an indication of a healthy market, the un-inversion of the curve has historically taken place right before a recession, stoking fears that a market downturn is right around the corner. 

“If you don’t have any sense of history regarding the economy, needless to say it would be positive,” the chief global strategist at LPL Financial, Quincy Krosby, told CNBC. “However, statistically the yield curve will normalize as the economy actually does go into a recession or is in a recession simply because the Fed is going to be cutting rates.” 

Recent economic data has, however, shaken confidence in the yield curves’ predictive powers. While in the past six recessions, a market downturn has taken place within two years of a yield curve inversion, the trend was broken with the most recent inversion, the longest on record. 

All eyes will be on the key August employment growth report, which will be released on Friday. The Fed will likely be using the data set to guide how large of an interest rate cut to make during the September Federal Open Market Committee meeting.