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Are we finally entering the recession?

Alpine4x4

Red Skull Member
Joined
May 22, 2020
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Central Washington
Interest rates plummeting on the heels of poor job reports and the fear the feds didnt dial back rate hikes fast enough. Feds hinting at almost certainty of rate cuts in September. Stock market diving hard. Is it finally starting to crumble?

www.marketwatch.com

Stock Market Today: Dow falls nearly 500 points as recession fears reemerge

Follow all the latest U.S. market action for Thursday here.
www.marketwatch.com www.marketwatch.com

www.foxbusiness.com

The July jobs report just triggered a reliable recession indicator

The July jobs report triggered the "Sahm rule," which is closely monitored by Wall Street, because it has been a historically accurate recession indicator.
www.foxbusiness.com www.foxbusiness.com

The weaker-than-expected July jobs report triggered a reliable recession indicator that Wall Street closely monitors, reigniting concerns about the health of the U.S. economy and sparking a steep market sell-off.


Employers hired 114,000 workers last month, the U.S. Department of Labor said in its monthly payroll report released Friday, missing the 175,000 gain forecast by LSEG economists. The unemployment rate jumped to 4.3%, the highest level since October 2021.

"The July jobs report is being viewed as a recession warning, and the markets are responding accordingly," said Bill Adams, chief economist at the Dallas-based Comerica Bank.

With the jobless rate unexpectedly rising, the so-called Sahm rule is now in play. Named after former Federal Reserve economist Claudia Sahm, the rule has successfully predicted every recession since 1970.




It stipulates that the economy is in the early stages of a recession when the three-month moving average of the jobless rate is at least a half-percentage point higher than the 12-month low. Over the past three months, the unemployment rate has averaged 4.13%, which is 0.63 percentage points higher than the 3.5% rate recorded in July 2023, crossing that threshold.

The thinking is that a rise in unemployment reflects a spike in layoffs. When workers lose their jobs, they cut back on spending, which in turn hurts businesses. Those businesses are then more likely to cut jobs, thus perpetuating the cycle. Historically, after the Sahm rule has been triggered, the unemployment rate has kept climbing.



"The Sahm rule does capture an important aspect of the historical data," said Preston Caldwell, chief U.S. economist at Morningstar. "Once the unemployment rate gets moving upward, it’s very likely to continue rising. Rising unemployment is part of a vicious process of economic contraction."

The rule uses the three-month moving average to smooth out any inconsistencies in the data and to capture the overall trend in the labor market, rather than rely on one data point that may be an outlier.


Still, Sahm – the creator of the rule – has suggested that the rise in unemployment this time around may not be indicative of an impending recession. She noted the rise in the jobless rate is not the result of layoffs and negative monthly payroll numbers, but rather an increase in the number of available workers, including immigrants.

"We are still in a good place, but until we see signs of stabilizing, of leveling out, I’m worried," Sahm told The Wall Street Journal.


Hiring may also have been disrupted last month by Hurricane Beryl, which slammed into the Texas coast in early July.

TickerSecurityLastChangeChange %
I:COMPNASDAQ COMPOSITE INDEX16765.391932-428.75-2.49%
SP500S&P 5005331.61-115.07-2.11%
I:DJIDOW JONES AVERAGES39541.72-806.25-2.00%
The jobs data adds to mounting evidence that the economy is weakening in the face of ongoing inflation and high interest rates, and raises questions about whether the Fed can successfully engineer a soft landing.


Policymakers voted to hold interest rates steady at a more than two-decade high on Wednesday, but they opened the door to a rate cut at their next meeting in September. More investors are now pricing in the likelihood of a bigger, 50-basis point reduction due to the sharp slowdown in job growth and the growing concerns of a recession.


"Today’s jobs report confirms the economy is on a weaker path," said David Donabedian, chief investment officer of CIBC Private Wealth. "There have already been concerns that the Fed has been late to the party regarding cutting rates, and this report feeds into that narrative. There is a rising risk of recession unless the Fed works more quickly now."

Stocks plunged Friday morning, with the Dow Jones Industrial Average tumbling more than 900 points. The Nasdaq dropped more than 3%, entering correction territory, while the S&P 500 slid 2.6%.
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www.mortgagenewsdaily.com

Things Just Got Serious (In a Good Way For Bonds)

This is one of those weeks that stands a good chance of being looked back up as the moment where the clouds of indecision parted and true trends were confirmed. Between Powell's equivocal openness to "multiple cuts" in 2024 on Wednesday and this morning's sharply weaker jobs report (something...
www.mortgagenewsdaily.com

This is one of those weeks that stands a good chance of being looked back up as the moment where the clouds of indecision parted and true trends were confirmed. Between Powell's equivocal openness to "multiple cuts" in 2024 on Wednesday and this morning's sharply weaker jobs report (something Powell didn't even know about on Wednesday), the more aggressive rate cut narrative is quickly coming into focus. There are still two CPI reports and another jobs report before the September Fed meeting. If they don't offer strong counterpoints to recent data, the rate cut cycle has not only begun, but it will likely involve a certain sense of urgency.

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I'm not liking what my stock is doing. I think that interest rates will fairly consistently until the election. Confidence in the market is fully dependent on the next 4 years.
 
I thought this was a landslide post for a minute.
Stocks are down on a friday. Not betting on a recession at this time.
The millennial in me wants it to crash into a fiery pile though. :mad3:
 
bad zuki said:
I thought this was a landslide post for a minute.
Stocks are down on a friday. Not betting on a recession at this time.
The millennial in me wants it to crash into a fiery pile though. :mad3:
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The stock market is reacting to the recession indicators, not just a Friday. Interest rates are down 1/4 point just today...
 
That's the usual way the rate hike cycles end. We have had a bond inversion for 2 years, longest in history but it's when un-inverts that the issues arise, The Sahm rule rule just triggered, plus a bunch of other indicators. I think a year from now the recession will be dated back to Q3 2024.

But I've been expecting it for a few years, the .gov spending really pushed it out.
 
Norm said:
That's the usual way the rate hike cycles end. We have had a bond inversion for 2 years, longest in history but it's when un-inverts that the issues arise, The Sahm rule rule just triggered, plus a bunch of other indicators. I think a year from now the recession will be dated back to Q3 2024.

But I've been expecting it for a few years, the .gov spending really pushed it out.
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they have just been prolonging the inevitable. my fear was they were going to cut rates, Trump gets elected, inflation gets hot Q2 25, trump gets all the blame.

now with Kamala being the next president, i wonder how its going to go. they don't want to damage her in her first term... but a prolonged recession, which we really have been in during this inflation period will hurt the Dems. not that they care really.

welcome to stagflation, everyone
 
Recession? I feel like wages finally caught up this year.

I can't take these "jobs" outlooks from the news seriously. It flip-flops from fear of loss, to how they're promising to make (sh!t) jobs like a rabbit farm.
 
Texas97 said:
they have just been prolonging the inevitable. my fear was they were going to cut rates, Trump gets elected, inflation gets hot Q2 25, trump gets all the blame.

now with Kamala being the next president, i wonder how its going to go. they don't want to damage her in her first term... but a prolonged recession, which we really have been in during this inflation period will hurt the Dems. not that they care really.

welcome to stagflation, everyone
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Either Trump or the dunce we are in big trouble, neither have any sort of reasonable plan to fix our economy. The only forward is inflation or bankruptcy, so inflation it is. Inflation is just devaluation of our currency. We are up shit creek without a paddle, things are going to be shit for at least a decade. This doesn't end well for the US.
 
Norm said:
Either Trump or the dunce we are in big trouble, neither have any sort of reasonable plan to fix our economy. The only forward is inflation or bankruptcy, so inflation it is. Inflation is just devaluation of our currency. We are up shit creek without a paddle, things are going to be shit for at least a decade. This doesn't end well for the US.
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Eh, the entire economy is designed to cycle in and out of recessions to avoid depressions. That's the entire basis behind the retarded theory that is Keynesian economics.

A large driving factor for getting us out of those recessions and keeping them short though is confidence in the economy. One of these candidates is going to be much better than the other at inspiring confidence in a recovering economy. There's a lot of wait and see in this economy right now, especially in construction, to see whether or not Trump is the one who wins. Investors will invest under Trump and take the risk. They won't with 4 more years of the bullshit we've been seeing. The only reason they had been taking the risk in the last couple years is because COVID prices were coming back down and restarted a lot of projects COVID had interrupted.

Edit: Trump doesn't need some grand plan to fix the economy, he just needs to keep the government out of the fucking way.
 
u2slow said:
Recession? I feel like wages finally caught up this year.

I can't take these "jobs" outlooks from the news seriously. It flip-flops from fear of loss, to how they're promising to make (sh!t) jobs like a rabbit farm.
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the great quitting back 3-4 years ago really destroyed the job market. people were paid to sit at home. if you wanted someone to show up you had to pay the hell out of them and steal them from somewhere else. right now, wages are ridiculously high. there's a correction coming soon. ive seen the job market slow down over the last 6 months.

The government has too, they just lie about it. either flat out, or they go back and "revise" the numbers back down. also there were many months were the only sector adding jobs was the government. which adds to inflation, etc.
 
Motorcharge said:
Eh, the entire economy is designed to cycle in and out of recessions to avoid depressions. That's the entire basis behind the retarded theory that is Keynesian economics.
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in all fairness, Keynesian economics says that government can just spend its way out of recessions and bouy the economy. thats why its so terrible. Obama really put the pedal down on that during his dictatorship.
 
I thought by the true definition we were a year or two ago?

But the commies redefined it, yet again.

This year has been the best in 6 or 7 for finding employees. Still not great and what I have to pay is still too much, but at least I'm getting relatively decent people to work.

Still getting a shit ton of no shows for interviews though.

And the shit I have to put up with from employees that do show up is still ridiculous.
 
Texas97 said:
now with Kamala being the next president, i wonder how its going to go. they don't want to damage her in her first term... but a prolonged recession, which we really have been in during this inflation period will hurt the Dems. not that they care really.
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Did I miss the election?
 
JD Mark said:
I thought by the true definition we were a year or two ago?

But the commies redefined it, yet again.

This year has been the best in 6 or 7 for finding employees. Still not great and what I have to pay is still too much, but at least I'm getting relatively decent people to work.

Still getting a shit ton of no shows for interviews though.

And the shit I have to put up with from employees that do show up is still ridiculous.
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thats true, its better now trying to find people. after companies start trimming fat this fall, then the next cuts will be some real meat trimmings, and thats when you find good people.

and yes, there was a couple quarters of negative GDP when inflation was like 9% YOY.
 
Texas97 said:
the great quitting back 3-4 years ago really destroyed the job market. people were paid to sit at home. if you wanted someone to show up you had to pay the hell out of them and steal them from somewhere else. right now, wages are ridiculously high. there's a correction coming soon. ive seen the job market slow down over the last 6 months.

The government has too, they just lie about it. either flat out, or they go back and "revise" the numbers back down. also there were many months were the only sector adding jobs was the government. which adds to inflation, etc.
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Not really, that's only really true for jobs that were paying like $40k and under. It fucked up the service industry, retail, etc but that's about it. Inflation is a large part of the wages. People were already under paid with wages stagnating for decades vs inflation. The rapid rise in inflation gave employers no real choice but to start paying more. Demand drove that a lot more than the government or COVID, at least in real, adult jobs.

Texas97 said:
in all fairness, Keynesian economics says that government can just spend its way out of recessions and bouy the economy. thats why its so terrible. Obama really put the pedal down on that during his dictatorship.
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Everything about Keynesian economics is terrible. :laughing:

Obama's spending was only half the picture. The other half was keeping artificial interest rates so low for so long after coming out of 08/09, then the same thing under Trump. We're now feeling the effects of that.
 
Texas97 said:
grow up, peter pan. the selection already happened, Kamala will be the next mask for Obama, Susan Rice, Jake whateverhisnameis, and Valeria Jarrett to operate behind.
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I have virtually no faith in the US citizenry, but still some in our country.
 
Motorcharge said:
Not really, that's only really true for jobs that were paying like $40k and under. It fucked up the service industry, retail, etc but that's about it. Inflation is a large part of the wages. People were already under paid with wages stagnating for decades vs inflation. The rapid rise in inflation gave employers no real choice but to start paying more. Demand drove that a lot more than the government or COVID, at least in real, adult jobs.


Everything about Keynesian economics is terrible. :laughing:

Obama's spending was only half the picture. The other half was keeping artificial interest rates so low for so long after coming out of 08/09, then the same thing under Trump. We're now feeling the effects of that.
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Don't forget we are now 35 trillion in debt, 1/3 of our tax receipts go to just to pay the interest. In order to keep spending two things need to happen

1. interest rates need to be kept artificially low.
2. Inflation needs to be above the rate of debt increases.

That's not good for the average joe. But it's going to happen.
 
Norm said:
Don't forget we are now 35 trillion in debt, 1/3 of our tax receipts go to just to pay the interest. In order to keep spending two things need to happen

1. interest rates need to be kept artificially low.
2. Inflation needs to be above the rate of debt increases.

That's not good for the average joe. But it's going to happen.
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The national debt is largely meaningless outside of inflation, the vast majority of that money is owed to us by ourselves and it's been mathematically impossible for the country to pay off for years now anyway. The only really important thing is managing the inflation ensuring that the global economy continues to operate off the USD. Two things this administration has been fucking terrible about.

Trump didn't do much to help inflation, but he did do plenty to help the economic base outside of that and was fantastic at promoting the USD while keeping us out of additional wars. Hell, just stopping the spending to Ukraine and keeping us from sending billions upon billions of dollars to other countries will go a hell of a long way and you know that's not going to happen under Harris.
 
Motorcharge said:
Not really, that's only really true for jobs that were paying like $40k and under. It fucked up the service industry, retail, etc but that's about it. Inflation is a large part of the wages. People were already under paid with wages stagnating for decades vs inflation. The rapid rise in inflation gave employers no real choice but to start paying more. Demand drove that a lot more than the government or COVID, at least in real, adult jobs.
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no, it happened in lots of other industries, engineering, trades, etc. it wasnt just the under $40k market. Theres already been layoffs in the surveying sector as development has slowed a lot. and i dont think its just interest rates. i think everyone is getting tight with their money. demand for housing is slowing way down as people realize they cant afford to upsize for a few more years.

edit: consumer debt is at an all-time high. something has to give and its going to be a big pull-back in spending.
 
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Norm said:
I think a year from now the recession will be dated back to Q3 2024.
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They are going to list the cause of the recession to the "State of Housing cost" thread because it stayed on topic for 16 pages in a row. :flipoff2:
 
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