When Recession?

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.


.
That is a MUCH longer delay (bigger lag) than I had thought.
I am much humbled by discovering this information.

Here’s more recent data to support this:

https://www.msn.com/en-us/money/personalfinance/american-household-debt-surges-in-q3-nearing-levels-not-seen-since-2008/vi-AA1jCto1?ocid=msedgntp&cvid=532886c099e24a339a78b304f69280e9&ei=14

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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:

https://www.msn.com/en-us/money/markets/the-economy-is-cooling-down/ar-AA1kVkDA?ocid=msedgntp&cvid=3060a237b4a947189d7c1d6097664182&ei=68

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.

Outside of recessions there has NEVER been such an uptick in Youth Unemployment as we are seeing now.

image

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.

Got to wonder how many of them don’t want to work?

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.

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11 more months until the (R)ecession begins. :wink:

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Most economic theories (lib and con) concur that recession don’t normally occur when there is a lot of cash on the sidelines.

People have cash, they are gonna spend it on something.
That spending will drive the economy.

In the broadest, simplest analysis (below) that means no recession until Jan 2025.

That’ll make it even easier for them to forget who flushed the baby with the toilet water. :rofl:

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But the above chart looks only at M2 now vs M2 during the established trend.
That (simplistic) analysis predicts “No recession until 2025.”

Below is the same chart, but instead of M2,
it examines M2/GDP.
This slightly more complex analysis predicts “Recession coming soon.”

Well, Jim Cramer says we’re not going to have a recession so I’ll have to reconsider.

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Maybe sooner:

https://www.msn.com/en-us/money/markets/economists-predict-increased-layoffs-and-recession-risks-in-the-us/ar-AA1nWcpe?ocid=msedgntp&pc=LCTS&cvid=048a9ace7ec44d38b6d24a202e2ff9b7&ei=33

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.

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Close enough. :sunglasses:

How about now? Markets down big this morning after a big sell-off on Friday.

How kind of you to remember!

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.

still awaiting the recession.

gdpnow is projecting 2.5% Growth in GDP 3q2024.

depending how the 4q2024. projecting 2.0% growth in GDP for 2024.

a far cry froma recesseion.

Allan

There’s other factors outside of GDP (which is becoming less relevant) that are concerning:

the market is down 1000 points, riots in England, Iran is about to attack Israel… how’s that democracy working for ya?

For Gaius.

tenor

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