Recession coming?

[EZEtoGRU]

Another massively positive jobs report was issued today busting through expectations. With such a strong economy, robust jobs picture, and upbeat consumer sentiment…there is clearly no recession on the horizon. 
 

Labor market grew 353,000 in January, soaring past expectations

STOCKS.APPLE.COM

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The gains were roughly double economists’ predictions of 177,000, reinforcing that the economy...

 

[EZEtoGRU]

Further to the above, the November/December2023 jobs numbers previously reported were increased by a whopping 126,000 jobs combined.  So a truly spectacular three months of jobs reports.  An analyst in the attached article repeats my prediction yesterday that a March interest rate cut is almost certainly off the table now.  Things are just going too well for the US economy for interest rate reductions in the near future.  

Also, they comment that recent layoff announcements by companies such as UPS are a minor factor in the grand scheme of the larger job market.  Basically, just a blip.

Things are just going too well with the US economy right now.

 

MSN

WWW.MSN.COM

 

Edited February 2 by Kevin Slater

[pubic_assistance]

1 hour ago, EZEtoGRU said:

Things are just going too well with the US economy right now.  WINNING!!

12% of the US population is now collecting Food Stamps.

That's 4 million more people since 2019.

THAT statistic speaks more to the reality of what's going on for the average American than all these cherry-picked reports of "low unemployment".  Most unemployment statistics are drawn from charts of people "actively looking for work" and ignore the millions of people who have given up trying, and instead live permanently on public assistance.

Keeping in mind that most US news outlets are now owned by the same few large Corporations that have an agenda to keep us believing what they want us to know and preventing a mass protest to the direction that Global business interests are taking us. Data is constantly skewed and interpreted by expressing numbers that don't give the complete picture of the overall problem. Much of the "employment" that is being touted, isn't providing enough income to put food on the table.

 

[+ augustus]

On 2/2/2024 at 2:44 PM, pubic_assistance said:

THAT statistic speaks more to the reality of what's going on for the average American than all these cherry-picked reports of "low unemployment".  Most unemployment statistics are drawn from charts of people "actively looking for work" and ignore the millions of people who have given up trying, and instead live permanently on public assistance.

Well said!!  About 1,500,000 cars are getting repossessed each year due to non-payment and people falling behind on car payments is at a 27 year high. The average family pays $11,000 a year more for the same goods and services than in 2019. Property taxes are soaring (they just DOUBLED in Columbus).  I think most of us see through this "All's Well" smokescreen. 

[+ augustus]

The federal budget deficit for the 2023 fiscal year clocked in at $2 trillion and 7.5% of GDP—roughly double what the deficit averaged as a share of the economy from 2016 to 2019.  Incredibly, hundreds of billions of dollars of PPP is still going out the door, despite the Senate Finance Committee stating a couple of weeks ago that 95% of these claims are fraudulent.  This is all about unsustainable federal spending and massive debt. It will end very badly.

[+ augustus]

“The first panacea of a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permeant ruin. But both are the refuge of political and economic opportunists."

Ernest Hemingway

[+ augustus]

$10 beers, $100 steaks, $100,000 pickup trucks, and $1,000,000 houses.  Things are going great!!

[+ stevenkesslar]

1 hour ago, augustus said:

This is all about unsustainable federal spending and massive debt. It will end very badly.

 

1 hour ago, augustus said:

$1,000,000 houses. 

Interesting and complex topics.

Here's a very thoughtful and granular policy analysis on housing finance and its potential impact on short term recession mitigation.  It elucidates many complex policy points that naturally are of interest to investors in real estate and stocks, like me, trying to avoid potential profit degradation from recessionary policy outcomes.

Will the housing market drive a recession anytime soon, like it did in 2008, when subprime lending had extremely detrimental policy impacts on a correlated group of macroeconomic variables?  Here's a strong opinion Kennon states that I think impacts a textured policy analysis:

Quote

Anyone under 40 years old who didn’t inherit money should be enraged. This was a policy choice. This damages American society and reduces the flexibility and dynamic nature of its economy. I don’t think it’s hyperbole to say that the Federal reserve has created something akin to a caste system or a landed aristocracy that divided the nation into winners and losers based on the generation into which they were born. In other words, this was generational warfare rather than class warfare.

If you read the data-driven line of reasoning Kennon refers to, he has a great point.  In plain English, if you are old you are rich.  And if you are young you are fucked.  I'm guessing most people reading this are on the old side of the generation war.

Kennon expostulates that it is a BAD policy choice that 2 in 3 Americans own their homes.  Almost all with either no mortgage, or a low fixed rate mortgage with an average interest rate of 3.7 % .  Really?  If this is BAD policy, who needs GOOD policy?  What's wrong with 2 in 3 Americans having affordable homeownership?

Kennon, who is young, is protesting what he views as Fed-driven interest rate musical chairs that has left many young people who want to buy homes standing - for now.  He's obviously right.  I think what he is missing is that the policy also created a solid bedrock of home equity and wealth for 2 in 3 Americans.  In other words, NOT just the rich.  This either mitigates against a recession, or puts a floor on how low a recession can go. 

We know how awful things got during the Great Recession, when toxic mortgages resulted in millions being foreclosed on and an estimated $6 trillion in home equity vaporized.  We are now living with the opposite policy choice.  And it seems to be working out pretty well.  Perhaps we could call it the difference between a Great Recession and a Recession Gone Missing.  Kennon argues, with factual precision, that  "housing prices could collapse and most people would still be above water."  That is the exact opposite of the Great Recession.  It's a bedrock of economic stability. 

The same postulation was shown to be true during the Great Depression, when home prices (albeit among a much smaller slice of Americans) dropped an average of 67 %.  That is, after all, what made it a Depression.  And a Great one.  We have the opposite problem.  Lucky us.

I'm a fan of the idea of government-financed 3 % fixed rate mortgages for young Americans.  Both to help them build wealth, and to put a further floor under how bad a future recession could be FOR ALL OF US.  Granted, recessions are not all like 1929 or 2008, driven by imploding home values and a sudden mass extinction of middle class wealth.  But the worst recessions are.  So this is a long term anti-recessionary economic policy that offers many benefits.  But also requires a nuanced policy debate. 

Kennon is right that such a de facto policy worked well for the old. And in and of itself it would not drive up the deficit.  The opposite.  It would generate a multitude of tax revenues, which are also anti-recessionary.

Our sage @augustus offers an extremely cogent remonstrance against historically large federal deficits, which I passionately concur with.  In plain English, massive deficits could fuck everything else up, badly. 

Not anytime soon.  But by the time that bomb goes off, it will be too late.  As Kennon argues, the malcontent young generations of today are paying the price in terms of high interest rates.  While a separate thread would be required to granularly dissect and disaggregate the many variables driving high interest rates, certainly the massive federal deficits are part of the problem.  Most Americans agree on this.  They could drive a deep recession, or a Great Depression, somewhere down the line.

 

[BSR]

On 2/2/2024 at 9:57 AM, EZEtoGRU said:

Further to the above, the November/December2023 jobs numbers previously reported were increased by a whopping 126,000 jobs combined.  So a truly spectacular three months of jobs reports.  An analyst in the attached article repeats my prediction yesterday that a March interest rate cut is almost certainly off the table now.  Things are just going too well for the US economy for interest rate reductions in the near future.  

Also, they comment that recent layoff announcements by companies such as UPS are a minor factor in the grand scheme of the larger job market.  Basically, just a blip.

Things are just going too well with the US economy right now.

 

MSN

WWW.MSN.COM

 

There are lies, damn lies, and then there are statistics.  Counted as 47,000 jobs "created" last quarter were simply striking autoworkers and actors returning to work.  In other words, some very creative accounting is producing these sunshine & rainbows jobs reports.

While reports keep saying the economy is great, most Americans keep thinking it's lousy.  A recent Pew poll shows only 28% of Americans think the economy is good or excellent while 72% think it's fair or poor.  Low (official) unemployment and lower inflation are the biggest factors cited by those who think the economy is good/excellent whereas high inflation and high cost of living most worry the other 72%.  The percentage who think the economy will be worse a year from now is 33%, down from 46% last April.

While those numbers arent awful, there is a clear disconnect between what government says about the health of the economy vs. what Americans are actually experiencing.

[+ augustus]

17 hours ago, BSR said:

While those numbers arent awful, there is a clear disconnect between what government says about the health of the economy vs. what Americans are actually experiencing.

Very true.  Nearly all the jobs being added are part-time, which actually indicates a recession.  And most are government jobs, which mean the private sector is cracking.

 

https://www.msn.com/en-us/money/savingandinvesting/jobs-report-was-crazy-strong-minus-the-troubling-parts/ar-BB1hHdrD?ocid=msedgntp&pc=HCTS&cvid=38d7fc3bbd294938b25923c8c6e0fcd5&ei=14

 

[EZEtoGRU]

...and then there's this.  Fox News hosts acknowledge that the economy is really good.  Even they recognize things are going really well in the US economically speaking.  It seems the 2-3 posters on here are the last ones to see the reality of what's happening in the heartland.  

Fox hosts forced to grudgingly admit Biden economy's booming

NEWS.YAHOO.COM

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Fox cable hosts are doing the job of the chair of the White House Council of Economic Advisers, Jared Bernstein, by admitting that the economy under President Biden is...

Full disclosure:  This video is largely about the economy rather than politics.

[Marc in Calif]

22 hours ago, BSR said:

While reports keep saying the economy is great, most Americans keep thinking it's lousy.  A recent Pew poll shows only 28% of Americans think the economy is good or excellent while 72% think it's fair or poor.  

While those numbers arent awful, there is a clear disconnect between what government says about the health of the economy vs. what Americans are actually experiencing.

You're conflating two very different reactions to the current economy.

The polls tabulate what respondents are thinking.

But you say that the polls show what the respondents are experiencing. 

Maybe you simply don't see the difference? 

Edited February 5 by Marc in Calif

[+ stevenkesslar]

23 hours ago, BSR said:

While those numbers arent awful, there is a clear disconnect between what government says about the health of the economy vs. what Americans are actually experiencing.

Any objective policy analysis has to commence with the verity of this statement.  In fact, as recently as last December 6 in 10 Americans said they felt like we're in a recession. Such emotional proclamations are objectively inaccurate, to be sure.  The economy is growing quit nicely.  What to make of this vexing question?  That's anyone's guess.

My guess is that when you're pumping gas, you're not thinking about how much more your home value or retirement account are up.  But beyond that, even if you are one of the 2 in 3 Americans who own a home, inflation probably did cut into your income in 2021 and 2022 pretty much no matter where you live in the US.   Or on the planet Earth.  2023 and 2024 are a different story. Wages are now outpacing inflation.  And have been for a year.  Maybe that's just starting to register. 

As shitty as many people feel about the economy, 2 in 3 expect to be better off financially in 2024.  Huh?  That doesn't sounds like an imminent recession to me.  It seems like at some point as income and net worth rise for Americans at all income levels optimism has to break through.  Although I think this thread proves that, regardless of net worth or income, there is a segment of Americans, especially older ones, who exhibit a profound and soul-stirring allegiance to pessimism.

And speaking of pessimism:

Fed’s Powell: ‘Urgent’ for US to focus on debt sustainability

Quote

“The debt is growing faster than the economy, so it is unsustainable,” the Fed chief said in an interview with CBS’s 60 Minutes. “It’s time for us to get back to putting a priority on fiscal sustainability. And sooner’s better than later.”

Now admit it, guys.  Our sage @augustus and I nailed it, didn't we?  From our keypads to Jerome Powell's lips.

Based on a complex statistical analysis, I would argue the chances of US federal debt causing a recession in 2024 are between "no chance whatsoever" and "absolutely fucking zero".  The more interesting question is how long will the vast majority of Americans who realize this is toxic for economic growth and our investments allow leaders to kick this can down the road while we bicker?  The answer to that is somewhere between "I don't have a clue" and "way the fuck longer than it should take, if we were acting like good investors."

Powell is right that sooner is better than later.  This thread and many more like it document the salutary effects of savings and investment. And the commitment of many posters here to basic financial apothegms.  It would also be salutary if the 83 % of Americans (including 85 % of young Americans who will be saddled with massive debts and high interest rates) could cut the bickering and focus on getting our leaders to compromise and do something about the debt. 

That's certainly one way to avoid a recession.  In addition to making common sense, it has worked in the past.

Carville was and is right, again.  The bond vigilantes are back:  

Quote

Soaring rates ... is a sign that bond markets are now being driven in significant part by the outlook for future U.S. government borrowing.

• In effect, the bond vigilantes — the term for bond investors whose buying and selling reflects judgments on a country's fiscal outlook — look to be a factor in the changing interest rate environment in a way they haven't in years.

 

[BSR]

1 hour ago, Marc in Calif said:

You're conflating two very different reactions to the current economy.

The polls tabulate what respondents are thinking.

But you say that the polls show what the respondents are experiencing. 

Maybe you simply don't see the difference? 

People form their opinions on the health of the economy based on their personal financial situation.  No government report will change that.  No matter how much you scream "the economy is GREAT!!", if a person's rent & groceries have increased 25% but his salary only 8%, he's gonna have a dim view of the economy.

Personal bankruptcies surged 18% in 2023, car insurance increased 19%, credit card debt hit an all-time high, and the percentage carrying a balance is up to 47% (39% in 2021). 

Go ahead & sis-boom-bah about the economy all you like, but don't expect the guy with a maxed out credit card & a $1200 car insurance payment due to agree with you.

[+ stevenkesslar]

6 hours ago, augustus said:

Nearly all the jobs being added are part-time, which actually indicates a recession.

Quote

BSR added:  People form their opinions on the health of the economy based on their personal financial situation.

Two-thirds of Americans think they’ll be better off financially in 2024: Survey

Quote

Most Americans are optimistic about what the next year will bring for them financially, with two-thirds saying they believe they’ll be better off in 2024, according to a new survey from Fidelity Investments.

Quote

However, more than one-third of Americans in the survey said they are currently in a worse financial situation compared to the same time last year, with the majority attributing the decline to inflation and cost of living increases.

Does this indicate a recession, too?  🤔

It may be a coincidence.  But that recent poll is by Fidelity, on investments, as opposed to some political pollster.  The notion that one-third feel worse off still, but two thirds are optimistic about their personal finances in 2024, seems to adhere better to objective economic realities.

And sorry to be a nagging bitch about one very important fact:

Many here, including me, would argue that ANY consumer debt is corrosive.  That said, it does keep the economy going.  Right now we are at historically low debt levels as a percentage of disposable personal income.  This offers evidence against an imminent recession, not for one.

To connect this to my postulations above, this is very different from 2008.  Back then we had the toxic combination of high consumer debt levels, and a mass extinction of $6 trillion in home equity. Which particularly nailed the middle class.  Even for those who did not lose their home.  We now live in pretty much the opposite environment.  No wonder 2 in 3 feel optimistic.

 

 

Edited February 5 by stevenkesslar

[+ augustus]

10 hours ago, BSR said:

People form their opinions on the health of the economy based on their personal financial situation.  No government report will change that.  No matter how much you scream "the economy is GREAT!!", if a person's rent & groceries have increased 25% but his salary only 8%, he's gonna have a dim view of the economy.

Exactly!  Inflation is masking the real decline in the standard of living, no matter what these cheerleaders say. 

[+ augustus]

@stevenkesslar.... yes, but you aren't giving the whole picture.  The low interest rates of the past have reduced the "Household Debt Service Payments as a Precent of Disposable Personal Income", but the nominal amount of Household Debt is at a record of over $17 trillion.  

And the National Debt is well over $30 trillion now.  It's horrible!

[+ stevenkesslar]

 

 

1 hour ago, augustus said:

@stevenkesslar.... yes, but you aren't giving the whole picture.  The low interest rates of the past have reduced the "Household Debt Service Payments as a Percent of Disposable Personal Income"

Yes, that is correct.  Consumers are spending less of their income on debt, not more.   It's near a record low, not a record high, in terms of how it actually hits people in the pocketbook.  That's not something that is going to cause a recession.

1 hour ago, augustus said:

It's horrible!

An interesting expostulation to which I can not concur, unlike our sage and symmetrical analysis of federal indebtedness. 

Personally, I think the historically low levels of their income consumers are spending on debt is great.  It does in fact indicate that incomes are going up, just like prices did.  And it's helping drive the recovery from COVID.  It's not driving a recession.  That is the whole picture.

But, hey.  Don't take my word for it.

Two-thirds of Americans think they’ll be better off financially in 2024: Survey

Stock Indexes Post Record Highs on Robust Earnings and U.S. Labor Market Strength

Edited February 5 by stevenkesslar

[Marc in Calif]

13 hours ago, BSR said:

People form their opinions on the health of the economy based on their personal financial situation.  No government report will change that. 

Let's fix that:

People form their opinions on the health of the economy based on the constant drumbeat of the media -- even if it doesn't reflect their own experiences. No government report will change that.

That's why people who are doing pretty well in the current economy will nevertheless "think" that the economy is still bad for others. 

Edited February 5 by Marc in Calif

[+ stevenkesslar]

So here is a very interesting chart from the latest report of the Conference Board on the leading economic index.  The LEI is supposed to help indicate when a recession is ahead of us.

Bad news, and good news.

Bad news is that, in oversimplified terms, whenever the blue line meets the red line on the way down, we know a recession is imminent.  So since we are under the red line,  we are either now - or about to be - in a recession.  in theory.

Good news:  In fact, does anyone notice the problem?

In 2001, 2008, and 2020, the simple idea worked.  When the LEI hit that red line, we were already in a recession in two of the three examples.  In the 9/11 recession, by the time the LEI bottomed its "V" at about -12 the recession had started.

Yet this time, we hit that red line over a year ago, in 2022.  Which is why we have heard so much about a recession coming.  For over a year.  And yet, where is it? 

Meanwhile, the LEI appears to have bottomed and is back on its way up.  The chart above slightly understates the case for optimism.  I could not cut and paste the Dec. 2023 image from the report.  So that image above is from October 2023, which I found online and could cut and paste.  The December chart shows the blue line kept rising at the end of 2023, and is now near the red line ON THE WAY UP.  Meaning perhaps the danger has passed?

Here is what the report itself says about a 2024 recession:

Quote

“Despite the overall decline, six out of ten leading indicators made positive contributions to the LEI in December. Nonetheless, these improvements were more than offset by weak conditions in manufacturing, the high interest-rate environment, and low consumer confidence. As the magnitude of monthly declines has lessened, the LEI’s six-month and twelve-month growth rates have turned upward but remain negative, continuing to signal the risk of recession ahead.

Quote

Overall, we expect GDP growth to turn negative in Q2 and Q3 of 2024 but begin to recover late in the year.”

So we are not out of the woods yet, according to the Conference Board.  But we have heard this song before.  And what they are talking about now - two quarters of slightly negative growth - is the shortest and shallowest of recessions imaginable.  in theory.  If it actually happens.

What's interesting is that the strongest indicators for both optimism and pessimism are pretty subjective.  The most bullish indicator is that the stock market is on a tear.  The most pessimistic indicator is that public opinion about the economy is, and has been, so pessimistic.  Yet it is clear that, right now, both the stock market and public opinion about the economy are going up - not down.  So on both a leading indicator for optimism and a leading indicator for pessimism, the bulls seem to winning.

I will mention again a key fact I cited above:  when asked about their personal financial prospects in 2024, 2 in 3 Americans say they think they will be better off financially this year.  That may be telling us something, too.

I've been dissecting this with my stock geeky nephew, and we have two different theories.  Both of which are plausible.  He thinks it's all that COVID stimulus money and "forced savings" that is still not spent out.  I think it's the fact that, as I have posted repeatedly, consumer debt as a percentage of disposal income is at a relative low, not a high.  Whether you like the idea or not, consumers have a lot more credit they could take on to fuel an expanding recovery.   Maybe the stock market knows this.

 

[TonyDown]

6 hours ago, stevenkesslar said:

So here is a very interesting chart from the latest report of the Conference Board on the leading economic index.  The LEI is supposed to help indicate when a recession is ahead of us.

Bad news, and good news.

Bad news is that, in oversimplified terms, whenever the blue line meets the red line on the way down, we know a recession is imminent.  So since we are under the red line,  we are either now - or about to be - in a recession.  in theory.

Good news:  In fact, does anyone notice the problem?

In 2001, 2008, and 2020, the simple idea worked.  When the LEI hit that red line, we were already in a recession in two of the three examples.  In the 9/11 recession, by the time the LEI bottomed its "V" at about -12 the recession had started.

Yet this time, we hit that red line over a year ago, in 2022.  Which is why we have heard so much about a recession coming.  For over a year.  And yet, where is it? 

Meanwhile, the LEI appears to have bottomed and is back on its way up.  The chart above slightly understates the case for optimism.  I could not cut and paste the Dec. 2023 image from the report.  So that image above is from October 2023, which I found online and could cut and paste.  The December chart shows the blue line kept rising at the end of 2023, and is now near the red line ON THE WAY UP.  Meaning perhaps the danger has passed?

Here is what the report itself says about a 2024 recession:

So we are not out of the woods yet, according to the Conference Board.  But we have heard this song before.  And what they are talking about now - two quarters of slightly negative growth - is the shortest and shallowest of recessions imaginable.  in theory.  If it actually happens.

What's interesting is that the strongest indicators for both optimism and pessimism are pretty subjective.  The most bullish indicator is that the stock market is on a tear.  The most pessimistic indicator is that public opinion about the economy is, and has been, so pessimistic.  Yet it is clear that, right now, both the stock market and public opinion about the economy are going up - not down.  So on both a leading indicator for optimism and a leading indicator for pessimism, the bulls seem to winning.

I will mention again a key fact I cited above:  when asked about their personal financial prospects in 2024, 2 in 3 Americans say they think they will be better off financially this year.  That may be telling us something, too.

I've been dissecting this with my stock geeky nephew, and we have two different theories.  Both of which are plausible.  He thinks it's all that COVID stimulus money and "forced savings" that is still not spent out.  I think it's the fact that, as I have posted repeatedly, consumer debt as a percentage of disposal income is at a relative low, not a high.  Whether you like the idea or not, consumers have a lot more credit they could take on to fuel an expanding recovery.   Maybe the stock market knows this.

 

I agree with your nephew that COVID money was a factor.  I assumed it was  one factor why prices rose.  But yeah it makes sense the economy would hum with COVID money being spent.

I see Jamie Dimon has altered his "recession is coming, there are bad things ahead" language to "the US is driving towards a cliff due to the national debt."  I suppose that helps his image by letting go of the "recession" word.   

The US "driving off a cliff" sounds more like the great, terrible unknown.  Could be a recession, but who knows?

I wish Jamie Dimon would end his interviews that way, saying "Who really knows?",  with an exaggerated shoulder shrug.

 

 

 

 

 

 

Edited February 15 by TonyDown

[EZEtoGRU]

2 hours ago, TonyDown said:

I wish Jamie Dimon would end his interviews that way, saying "Who really knows?",  with an exaggerated shoulder shrug.

 

 

 

 

I wish Jamie Dimon would end his interviews saying "Since I'm consistently wrong with my economic predictions...who really knows?"

[BSR]

1 hour ago, EZEtoGRU said:

I wish Jamie Dimon would end his interviews saying "Since I'm consistently wrong with my economic predictions...who really knows?"

The guys who started predicting a recession back in 2003 weren't "consistently wrong" throughout the aughts.  It just took a while for the gigatons of sh*t to hit the fan.

[SouthOfTheBorder]

recession ?  not according to my broker.  I just made $$$$$

stop complaining- start investing 

[Marc in Calif]

7 hours ago, SouthOfTheBorder said:

recession ?  not according to my broker.  I just made $$$$$

Wow. That's really deep!

It's kinda like saying that because it's snowing in January, "global warming" cannot possibly be happening. 😂😂😂

Don't confuse your tree with the forest. 🌳

Edited February 16 by Kevin Slater