The NBER, National Bureau of Economic Research Business Cycle Dating Committee, dating committee? is the official organization that calls recessions and here is how they define recessions “A recession involves a significant decline in economic activity that is spread across the economy and lasts more than a few months.” The definition used to be 2 consecutive quarters of declining GDP, but a non-profit, non-partisan organization called the NBER didn’t call it a recession when it happened in 2022. Non-profit, for the record I just went to their site, and they tried to charge me a full subscription for $3,145 or an online academic subscription for $1,440. Well, the last recession they called was in 2020 and lasted two months. That violates their own definition and therefore I feel triggered and violated. I am speaking for all the millennials out there, waaah! There, now we carry on. I have a first amendment right to declare a recession any time I feel like it, just as the NBER slid into the position in the 1920s. There were plenty of recessions before them and the NBER is late more often than newlyweds when it comes to calling recessions. When it is over, that is usually when they make an announcement. They are like tornado sirens of yesteryear. The NBER rides in to save the day and put their hands on their hips and declared “recession aqui!” What a useless organization, they rival Congress and that little slime under a sloth’s belly for uselessness. Therefore, I identify as an official recession caller and I have your NBER right here, Newly Born Economic Recession. NBER. I will let them call it whenever they want to, but folks it is here. The data and actions are the shots across the bow.
When the yield curve is inverted it has a excellent track record of forecasting recessions. When the 3 month treasury yield goes above the 10-year treasury yield, it takes about 14 months on average for a recession to begin. Guess when the 14 months begins, that’s right Q1 as it crossed in late October 2022. It is now at 1.31% down from 1.89%. Other yield curves are started to get very close to un-inverting after months of inversion as well. The 10yr /2 yr spread has went from negative 108 basis points to 17 basis points. When the curves un-invert is usually when two things happen, the stock market sells off and the recession starts. I will link to some of these charts from the St Louis Fed, Fred site.
Another interesting exercise that has led me to call a recession is that we are experiencing the same why as most recessions in history. Let’s go back in time for a bit and look at some of the recessions or panics as they were often called before the NBER. The Panic of 1785, caused by overexpansion and debts after the American revolution. We just overextended during Covid and have massive debts as a result of government spending. Copper Panic of 1789 was next and caused by debased money just as our currency is being debased now by government spending, see what the BRICS are doing as an alternative, they know. The Panic of 1792 included the extension of credit and excessive speculation which is similar to our recent spate of zero interest rate policy, ZIRP, and bubbles in everything from crypto, to NFTs, to real estate, stocks, and bonds. The Panic of 1796-1797 came just as a land speculation was bursting, and along came the Bank of England with deflation due to their involvement in wars. How many wars are we fighting right now? Commercial and real estate markets were severely affected in the United States. Commercial real estate in 1796 doesn’t hold a candle to the fire sales that are going on every week with huge office buildings. 1802-1804 recession was partially caused by a disruption in trade caused by pirates leading to the first Barbary War. Tripolitania declared war against the US and Sweden and were menacing ships in the Mediterranean just as we now have the Houthis doing the same in the Red Sea. The Depression of 1807 was largely caused by the Embargo Act of 1807. Ships sat idle, stocks fell, and trade volumes were hit. Trump started the tariffs on China when he was President and just yesterday he announced he wanted to put a 10% tariff on all imports. The 1812 recession was short as we started a war with England and production picked up quickly which is likely what we will try and do. But after the war of 1812 there was a 6 year depression from 1815-1821 due to the inflation after the war. It peaked in the Panic of 1819 when banks failed, widespread foreclosures, unemployment spiked, a collapse in real estate prices and a slump in agriculture and manufacturing. We have banks failing, and many banks are insolvent right now if they were forced to mark to market their underwater bond holdings. We don’t have many foreclosures yet, but that is because the government outlawed it for a couple years remember. It is now picking up quickly and I am attaching a DQYDJ.com housing affordability model to show you that housing has become the most unaffordable in 50 years. When people lose their jobs, foreclosures will pick up but more on jobs in a minute. Manufacturing…wait here is David Harrison writing for the Wall Street Journal, “U.S. manufacturing is entering a golden age, with government subsidies sparking a boom in factory construction. Yet the industry is also mired in the longest slump in more than two decades. Activity has weakened for 13 straight months, the longest stretch since 2002, according to surveys of purchasing managers by the Institute for Supply Management.”
We can go on and on and on, but as you can see America today is speculating, we are overextended in credit, we have too much debt, too much government spending, and worst of all we have no sense of history. We actually believe that it doesn’t matter. That is one school of thought, but there is an old saying about recessions and depressions, a recession is when your neighbor loses his job, but a depression is when you lose your job. I believe that we got through the holiday season as a warm eggnog swilling covey of quail but are now facing the harsh reality of higher rates for longer. Listen to these job cuts in the last week from dailyjobcuts.com… Are you ready buckle up butter cup…LA Times 94, Brex 20% of staff or 282 jobs, Riot Games 530, Vroom, winding down ecommerce business 800, Prima Wawona 5,400, TikTok 60, AEP 270, Paramount Global new round of layoffs, Cult.fit 100, Duke Energy confirms layoffs no number given, Solar Edge 900, Corning 1,000 jobs, Discover Financial 108, KeyBank 1,000, Wayfair 1,650, Ebay 1,000 or 9% of workforce, and SAP plans job changes or buyouts for 8,000 employees. Wait there is more…American’s Credit Union 80, American Electric Power 270, Macy’s 2,350, The Arena Group 100, CI games 10% of staff, Google announced more job cuts later this year, Sunrun 62, Amazon confirms layoffs coming in Prime unit, Youtube 100, Lonza 218, Thunderful 20% of its workforce or 100, Conde Nast is merging with Pitchfork resulting in layoffs, and Sports Illustrated might be laying off its entire staff. That is in the last 7 days. Just go to dailyjobcuts.com and watch the scene unfold and read the links and articles yourself. They are doing excellent work documenting this pig on ice trying to slow down.
These are good jobs. I didn’t list the local diner cutting back on the Tuesday lunch shift. This might come as a shock because of the wonderful job numbers that repeatedly get put out. Jeffrey Bartash writes for Marketwatch, “From January to October, the government initially overestimated job growth in nine of the 10 months.” The numbers that we are seeing aren’t very accurate. The government models aren’t very accurate, and it would behoove everyone to check the sources of information before repeating it verbatim and making an opinion about it. That’s what I get to do, but I try to list my sources and get them from reputable sources aka non-government. Remember Covid?
Let’s look at another bad sign ahead released on Monday, the leading economic indicators. I ‘m attaching a link to the Conference Board Leading Economic Index (LEI), “The US LEI fell slightly in December, continuing to signal underlying weakness in the US economy,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. Continuing “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.”
We also have the bank term funding program running out of in March and we have the reverse repo draining like sand on Aaron Rodgers career, and that facility has been the big buyer of treasuries recently, but they are about out of time as well. So, we have the conditions necessary for a recession, we have an inverted yield curve starting to un-invert, we have job losses starting to accelerate, and we have the leading economic indicators signaling recession, but what does a consumer driven economy really need to drive it across the cliff of recession, slower spending.
I don’t believe that the US consumer will ever stop spending on their own accord. But this from Alicia Wallace from CNN Business, “All stages of credit card delinquency (30, 60 and 90 days past due) jumped higher during the third quarter of last year, surpassing pre-pandemic levels for the first time, according to a report released Thursday by the Federal Reserve Bank of Philadelphia… The delinquency rates exceeded those seen during the fourth quarter of 2019, and are close to setting a high for the data series that started in 2012, according to the report.
“In response to this deterioration, banks are granting fewer credit line increases and reducing credit lines more frequently in the recent four quarters,” economist Gene Huang and senior analyst Anna Veksler wrote.”
In addition to job losses the credit will be taken away. No more buying from the general masses. That’s the kill shot. Call it if you like NBER, but the recession has started. What are you going to do Chair Powell? Now it is your call….
Sincerely Yours,
C Thomas Printer
On this date in history… 176 years ago to be exact, gold was found in the American River near Sutter’s Mill in California launching one of the largest gold rushes of all time.
Also born on this date… the songwriter best known for Sweet Caroline, Neil Diamond.
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.