When the Recession Will Hit
Andy Snyder|March 8, 2023
Six months ago, just about every analyst, economist and journo-idiot was calling for a recession.
Where is it? What happened?
And, more importantly, when will it come?
The downturn is not here yet. The data proves it. And while some may find it hard to believe, the declaration of a recession is at least seven months away.
Take a look at the chart…
Source: Federal Reserve
The latest reading of the Atlanta Fed’s popular real-time data tracker puts the nation’s GDP on track to grow just over 2% this quarter. Even more, you can see the estimate (from both the Fed’s computers and Wall Street’s chosen analysts) has continued to rise over the past month… showing just how surprised most folks have been by the economy’s strength.
We used the word “surprised” above. It was purely out of convenience.
We could have instead said “disappointed,” and it would have been far more accurate. But then we’d have had to explain who’s disappointed: the inflation hawks. After all, if the economy is growing… it’s quite likely that prices are too.
Jay Powell is certainly unhappy about the news.
Stock investors should be too.
No Sign
If you know anything about the arbitrary way recessions are dubbed recessions, you know it takes at least two quarters with negative GDP growth in order to get the official designation.
The folks in charge will also clear the postnasal drip from their throats, push their glasses up the bridges of their noses and tell you it also takes a painful job market to push the economy into an official recession.
So far… we’ve got no sign of either variable.
In fact, contrary to what you may have heard, the jobs market isn’t even showing signs of a major slowdown (although we hope this is thoroughly contradicted by Friday’s jobs figures).
Oh sure, the headlines tell us of the pain in Big Tech. Microsoft, Amazon, Twitter, Meta… they’ve all slashed thousands of jobs.
But predicting that the problems in tech will spread to the rest of the economy would be like seeing it rain in Seattle and forecasting the Great Flood. Noah would be silly to be calling in the ducks and the quail.
The truth is that the net jobs figures in the IT sector have gone unchanged over the last six months. Just as many folks have been hired as have been fired.
There goes that narrative.
And across the economy, 72% of industries are currently hiring. That’s 10 points higher than average.
With just a bit of research, we can see that each of the last four recessions saw job losses exceed job gains by as much as 10-to-1.
Great! No recession. So let the good times roll?
Not so fast, buckaroo…
An Ugly Number
All of these facts and figures would be good if not for one very ugly figure: 6.4%.
That’s the current rate of inflation.
Strong employment numbers and an economy that continues to surprise to the upside are wonderful things when prices aren’t soaring. But when Uncle Sam is losing control of his precious greenbacks, this scenario is trouble.
It means, as we’ve said for quite a while, that interest rates should be much higher than they are right now. The Fed’s rate should be north of 6.5%… not the 4.5% it’s sitting at today.
We’ll get there… eventually. We have to. But it’ll be a while until the mainstream swoops in on the idea.
And the longer we wait, the harder the landing will be. In other words, the longer this situation remains out of control, the harder the Fed will have to slam on the brakes to bring price hikes to a stop. (And reading between the lines in yesterday’s congressional grilling, it seems like Jay Powell is starting to see things how we do.)
The inevitable recession will hurt all the more for it.
So when will it come?
It’s like we’ve said all along. If everybody expects it… we’re not there yet.
The market is a mean beast. It likes to hurt as many folks as it can. When everybody is leaning in one direction, it pulls the rug in the other.
Right now, everybody expects a downturn. But it’s not here. The data proves it.
When you see the “all clear” headlines… that’s when you should be scared.
That’s when the recession will roar.
