We have never had this much “cash on the sidelines” (money market accounts, bank balances etc.) before so, anything could happen.
Still,
the Fed is hiking rates,
banks are tightening credit,
Rates are inverted
anyone with an income level (low or middle) that would be hurt by inflation, is borrowing more and spending less.
etc.
In short, except for a strong labor market, we have every imaginable sign of a looming recession. But when?
Based on the recent “lags” between “when did the Fed hike?” and “when did the recession begin” we should expect a recession to begin sometime between Sept '23 and "June '24.
If a recession began then it would be “right on schedule.”
But it would not be unusual for a longer lag to occur, in which case the recession could begin Jan-Sept of '25.
Clearly the economy, especially the labor market, has been much more resilient than many had predicted, but how much of that strength is the result of unprecedented government spending? Another question is that of the strength of the consumer to keep up their spending habits? I thought this was an interesting take on where things could be heading:
A revision to the nation’s gross domestic product in the third quarter, released on Wednesday, showed astonishing growth of 5.2%. The consensus of economists say that this pace is simply not sustainable, and they expect the economy to slow drastically from here as high interest rates take their toll.
Moody’s Analytics Chief Economist Mark Zandi, for one, expects GDP to land somewhere around 2.5% when its averaged over the year, and he sees it slowing to 1.7% for all of next year.
Fridays’ jobs report will be interesting as we will see if shows a continuing slowing of the labor market. On a personal note, it was definitely harder to save money over the past year especially with the cost of groceries and dining out being what they were. I know that I will look at areas to cut spending over the next year.
Since 1948
every single time we got this sort of up tick in U-1
it the doubled (or even tripled)
and a recession followed.
There is still a ton of cash on the sidelines, and
homeowners (60% of families) are still rolling in dough an have very low mortgage payments.
Anything can happen in a 60-40 economy.
Anything can happen when there is a ton of cash on the sidelines.
But it certainly would be unprecedented if the economy stays strong for the next 6 months.
Oh, I am sure there are always a few liars among them.
Still, the % of folks who claim to be looking for a job but aren’t does not likely change suddenly for no reason.
As the US economy grapples with significant challenges, it increasingly mirrors the economic scenario in China, where heavy government debt once played a pivotal role in sustaining growth. According to Danielle DiMartino Booth, a veteran forecaster and chief strategist at QI Research, the US might already be in the throes of a downturn, contradicting the more optimistic projections from Wall Street of a gentle economic decline.
Whenever I make a (timed) prediction I try to remember phrases like “at the going rate,” or “if things continue this way,” because I am never sure if they will. (so in the end a prediction is just a guess.)
A short time ago I predicted If the Fed does not intervene home prices will follow the dashed orange line below. You can love or hate the Fed, but they intervened and so I can’t really take a bow for that one.
