On Thursday, the government reported real Q2 GDP at -0.9%. There are those who say the weak GDP numbOn Thursday, the government reported real Q2 GDP at -0.9%. There are those who say the weak GDP numbers are misleading – employment is strong, and, if there is a recession, it will be mild. What do you say to that?
• That’s the narrative that Wall Street and the Politicians want you to believe. But it is just another narrative.
o Officially, the NBER dates recession start and end dates, but it often takes them many months to do so – sometimes even after the recession has ended.
o But there has never been two negative GDP quarters in a row without the NBER “officially” designating a recession. So, two negative GDP quarters in a row has become the “rule of thumb” for practitioners while we await official word from the NBER. When the White House or the politicians say we are not in an “official” recession, that’s because the NBER has yet to opine. But, trust me, we are in a recession!
• Walmart just reported – they missed on the top and bottom line because consumers have significantly slowed their purchases of discretionary items
• Target, when they reported a few weeks ago – same story
• Both of these say their inventory levels are too high, so that means they won’t be buying as much from their suppliers (the good news is that their “stuff” is all going to go “on sale”)
• The labor market:
o Payroll vs. Household Survey – explain the difference
o Payroll (headline) positive +372K
Birth/Death model
o Household Survey -315K (negative in 2 of last 3 months)
o Shrinking Labor Force??? Washington Post article 1.5 million of 3 million who retired during Covid now going back to work (inflation 65%, bad equity market (45%))
o Initial Claims – weekly initial filings for unemployment – have risen 90K from their lows in March – looking at this historically, on average, +75K is when recessions occur...ers are misleading – employment is strong, and, if there is a recession, it will be mild. What do you say to that?
• That’s the narrative that Wall Street and the Politicians want you to believe. But it is just another narrative.
o Officially, the NBER dates recession start and end dates, but it often takes them many months to do so – sometimes even after the recession has ended.
o But there has never been two negative GDP quarters in a row without the NBER “officially” designating a recession. So, two negative GDP quarters in a row has become the “rule of thumb” for practitioners while we await official word from the NBER. When the White House or the politicians say we are not in an “official” recession, that’s because the NBER has yet to opine.
But, trust me, we are in a recession!
• Walmart just reported – they missed on the top and bottom line because consumers have significantly slowed their purchases of discretionary items
• Target, when they reported a few weeks ago – same story
• Both of these say their inventory levels are too high, so that means they won’t be buying as much from their suppliers (the good news is that their “stuff” is all going to go “on sale”)
• The labor market:
o Payroll vs. Household Survey – explain the difference
o Payroll (headline) positive +372K
Birth/Death model
o Household Survey -315K (negative in 2 of last 3 months)
o Shrinking Labor Force??? Washington Post article 1.5 million of 3 million who retired during Covid now going back to work (inflation 65%, bad equity market (45%))
o Initial Claims – weekly initial filings for unemployment – have risen 90K from their lows in March – looking at this historically, on average, +75K is when recessions occur...